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WHATS
REVOLUTION
AG MARKET
CAUSING
THE
AGRICULTURE INSIDER
PETE NESSLER DRAWS
GRAINS WORLD MAP
HOT NEW CTAS
NEW TRADERS
BEAT TOUGH MARKET
EXPLORING GANN
SIFTING THROUGH
BREAD CRUMBS
NOVEMBER 2013
FUTURESMAG.COM
NOVEMBER 2
FUTURESMAG
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41
years
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CONTENTS
6 Ad Index
8 Editors Note
Agriculture means business
10 Market Watch
Shutdown likely to keep
tapering at bay
12 Options Strategy
Using a strangle or straddle
to trade a moving market.
46 Trader Profile
Third Street Ag:
Fundamentally sound
DEPARTMENTS
NOVEMBER 2013 // VOLUME XLII NUMBER 9
Pete Nessler is good Midwestern stock
By Ginger Szala
Earning his stripes in the grain fields of Iowa, Pete Nessler has witnessed
how the agriculture markets have changed dramatically over the past 30
years. Now the CEO of FCStone, we talk with him about those changes,
and how a small Midwestern firm grew and changed with them.
COVER STORY
14
4 FUTURES November 2013
For reprints and e-prints of FUTURES articles, please contact
PARS International at reprints@parsintl.com or (212) 221-9595.
FEATURES
MARKETS
20 A winters tale: No dormancy for
grains or livestock
By Rich Nelson
With crops coming in better than
expected, questions now turn to how well
demand will be able to accept this supply.
TRADING TECHNIQUES
26 Harvesting profits from
corn fundamentals
By Michael Gross
With grain harvests nearly finished,
here are a couple of options strategies
to take advantage of fundamentally
and seasonally driven price changes.
30 The profitable, hidden and Markovian
couple of Swiss and gold
By Donny Lee
Hidden Markov models are making
inroads into institutional trading.
Heres how using them in one market
can help your forecasts in another.
34 Unlocking W.D. Ganns
The Tunnel Thru the Air
By Pauline Novak-Reich
Although W.D. Gann is well-known
among traders, little is known about
the thought process behind his
approach. Perhaps his 1920s science-
fiction novel contains the hints we seek.
EQUITY TRADING TECHNIQUES
38 Using moving averages to
target the trends
By Raghav Behani
Every market has its time,
including stocks. Heres how to
use moving averages to get in early
when trends are changing.
MANAGED FUNDS
40 Hot new CTAs move beyond
rough couple of years
By Daniel P. Collins
Although the last couple of years have
been rough on traders, here are three
emerging managers who successfully
have navigated the post-2008 chop.
For additional information,
visit futuresmag.com
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Associate Editor
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Murray A. Ruggiero, Jr.
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BOOK REVIEWS
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Chronicles of a
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Leslie Masonson
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Trading
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EXTENDED INTERVIEW
Check out the unabridged
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greater depth on the changes
in the agriculture markets and
how FCStone has adapted to
those changes.
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Agriculture means business
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A
nyone who has seen Field
of Dreams or any movie
based in the American
heartland has the vision of vast
fields of grain blanketing the
landscape to the horizon. Non-
Midwesterners still believe there
is nothing in the countrys center except corn, soybeans and
wheat. In many ways they are right, as the Midwest still is the
engine behind the agriculture business in the United States,
but much has changed.
Although ethanol as a fuel source had been part of the lexicon
for decades, during the early 2000s ethanol plants began to be built
in earnest. In 2005, the Environmental Protection Agency (EPA)
came up with Renewable Fuel Standards mandating that 7.5 billion
gallons of ethanol needed to be blended into fuel by 2012. That
truly set in motion the push to produce ethanol, and corn prices
went from a sleepy $2.50 to $3.00 per bushel to more than $8.00 a
bushel. Throw in some very bad weather years and price volatility
escalated for all agricultural products.
Step in market forces, which basically saw a jump in consump-
tion both from a growing demand from Asia as well as the need
to make ethanol, and this ignited a global move to produce grain
crops that the world needed. South America always was a grain
producer, but today it is out producing the United States in soy-
beans. The Black Sea region, again always a grain producer, now is
an expanding force in wheat.
Another push came from the major agricultural trading compa-
nies, or the ABCDs, that is: Archer Daniels Midland (ADM), Bunge,
Cargill and Louis Dreyfus. Although always giants in agricultural
processing and distribution, these groups went global in all aspects
of the business. Joining them on another end were the commod-
ity trading companies, not there for the end user, but global trad-
ers who would work to move world products: Firms like Noble,
Glencore and Olan all grew over this period, over-lapping in some
areas with the ABCDs, but basically focusing on trading for their
core revenues.
Today, other new players have joined the fray, including large
hedge funds who are purchasing land to grow products. Add to this
other new players, such as high-frequency traders and prop houses,
and it makes for turning the former U.S.-centric ag business into a
global mega-industry that still is growing.
Despite this global explosion, the futures markets havent neces-
sarily kept up; open interest has been relatively stable while deliv-
ery points have yet to be expanded beyond the United States. This
means brokers who typically thrived on the futures side of the busi-
ness began to look elsewhere to expand.
To get an insiders view of this change in the ag business, we
spoke with Pete Nessler, CEO of FCStone, the commodities arm of
INTLFCStone. Pete has been in the ag business more than 30 years,
learning early the realities of hedging globally when he began trading
just as the Falklands war heated up. From there he worked with eleva-
tors and farmers to hedge product, as well as pushed FCStone into
the ethanol revolution. (See Pete Nessler is good Midwestern
stock, page 14). With FCStone being one of the largest clearing
firms in grain products, Pete has seen from the inside what changes
occurred, and what still needs to happen.
Because of the changing industry, FCStone has moved beyond
American shores, working the ag business globally, as well as
expanding into other commodities, such as softs. And, MF Globals
demise had one silver lining (literally) for FCStone; it picked up
MFs London Metal Exchange group, and quickly became one of
the worlds largest precious metals brokers.
Next month well be doing our Top Brokers review, but with the
changing makeup of the grain markets, we believed it was a good
time to look at how one firm changed with the business it grew up
in, moving from the Iowa grain fields to new countries and new com-
modities. No doubt, this is a template most firms would like to fol-
low as the commodity business, especially grains, explodes.
E-mail me at gszala@futuresmag.com
1.800.264.8516 | TradeStation.com
No oer or so||c|tat|on to buy or se|| secur|t|es, secur|t|es der|vat|ves, utures products or o-exchange ore|gn currency (orex) transact|ons o any k|nd, or any type o
trad|ng or |nvestment adv|ce, recommendat|on or strategy, |s made, g|ven or |n any manner endorsed by any TradeStat|on af||ate. Trad|ng commod|t|es utures, opt|ons
and o-exchange ore|gn currenc|es carr|es a h|gh |eve| o r|sk and may not be su|tab|e or a|| |nvestors. There |s a poss|b|||ty that you may susta|n a |oss equa| to or
greater than your ent|re |nvestment, thereore you shou|d not |nvest or r|sk money you cannot aord to |ose. P|ease v|s|t our webs|te www.TradeStat|on.com or re|evant
r|sk d|sc|osures. Equ|t|es, equ|t|es opt|ons, and commod|ty utures products and serv|ces are oered by TradeStat|on Secur|t|es, lnc. (Member NYSE, FlNPA, NFA and
SlPC). Forex products and serv|ces are oered by TradeStat|on Forex, a d|v|s|on o lBFX, lnc. (Member NFA). TradeStat|on Secur|t|es, lnc. and lBFX, lnc. are separate but
af||ated compan|es. 2013 TradeStat|on. A|| r|ghts reserved.
TradeStations tools help you spot opportunities
before other traders do. See for yourself. Go to
TradeStation.com and take the TradeStation Tour.
The Proof is in the Platform.
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M
uch as the Federal Reserve relies on communication
and forward guidance, the task of clearly signalling
its intentions to financial markets is not getting any
easier in wake of the Federal Open Market Committees (FOMC)
surprise decision not to reduce asset purchases on Sept. 18.
At the best of times, it is difficult to assess and forecast the
economy, and for a central bank that
claims to be both forward-looking and
data-dependent testing its projections
against reality that makes monetary
policymaking tricky. These days, the
exercise is further complicated by parti-
san wrangling over fiscal policy that is
clouding the outlook.
Fiscal drag has transmuted into fis-
cal anxiety, making firms and households
more uncertain than ever and hence more
hesitant to hire, spend and invest. Never
mind that the official data black-out
attending the federal government shut-
down makes it hard for the Fed even to
measure the economy.
The debate rages on whether the Fed
misled financial markets about the
FOMCs plans to reduce the $85 billion
monthly bond buying. In his post-FOMC
press conference, Chairman Ben Bernanke unapologetically told
reporters, I dont recall stating that we would do any particu-
lar thing in this meeting. And he said, Fed actions are not
determined by Wall Streets expectations of what we might or
should do.
New York Federal Reserve Bank President William Dudley
advised markets to treat what we say as what we mean, dont
think that were hinting at something.
But even some insiders concede the Fed was less than per-
fectly transparent.
Philadelphia Fed President Charles Plosser, among other offi-
cials, took umbrage, telling me we did ourselves a disservice in
this (communication) process in September. He added, We
had set the market up for an expectation that we would start
to wind down purchases in September. Plosser serves on an
FOMC subcommittee headed by Vice Chairwoman Janet Yellen.
When rates rose sharply after Bernankes June 19 statement
that, if the economy performed as hoped, the FOMC expected
to begin tapering bond buying later this year, Fed officials
became concerned about the impact on housing. But Plosser
contends they didnt clearly convey those concerns and push
back against market expectations of a September move.
While communication always can be improved, there are more
profitable pursuits than laying blame namely trying to figure out
when and under what conditions the FOMC will begin scaling back
its purchases of longer term Treasury- and mortgage-backed securi-
ties. Of course, thats easier said than done in the current climate.
Since the FOMC said it wanted more evidence that progress
will be sustained in labor markets, officials have been renewing
their commitment to data dependence. But that begs the ques-
tion of how much more evidence and over what time frame.
Thats a tough question to answer in
a data vacuum. Even when statistical
agencies start cranking out numbers on
employment, retail sales, housing, infla-
tion and so forth, there are sure to be
varying responses.
For those policymakers, such as St.
Louis Federal Reserve Bank President
James Bullard and Governor Jeremy Stein,
who regarded the Sept. 18 decision to
stand pat a close call, perhaps it wont
take much to support a modest tapering.
But for others, the bar is higher.
Dudley outlined two tapering tests: (1)
Evidence that the labor market has shown
improvement, and (2) information
about the economys forward momen-
tum that makes me confident that labor
market improvement will continue in the
future. Meanwhile, he said the economy
still needs the support of a very accommodative monetary policy.
Boston Fed President Eric Rosengren sounded even less eager
to taper. Asserting that he strongly and unequivocally voted to
delay tapering and saying the economy is just treading water,
the FOMC voter said we need to see data that compellingly
suggest that over the next three years we are indeed on a path
to reach full employment and 2% inflation.
Bernanke, who is expected to step down when his second term
as chairman ends Jan. 31, 2014 and be replaced by Yellen, has
had little to say publicly since Sept. 18, but did lament in early
October that the recovery remains frustratingly slow.
Frustrating indeed. Despite holding the federal funds rate
near zero for going on five years and expanding its balance sheet
by a further $1 trillion over the past year, the gross domestic
product has continually fallen short of Fed projections, lan-
guishing in a 2% growth slough that casts doubt on the econo-
mys ability to sustain substantial labor market improvement.
True, the unemployment rate has fallen to 7.3% from a peak of
10%, but thats in good part to a plunge in labor force participa-
tion to 63.2%, its lowest level since 1978. Non-farm payroll growth
has slowed to an average 148,000 over the past three months. And
of course the inflation rate is running far below the 2% target.
Add the frustration of the fiscal stalemate and the damage
it has done to confidence, and you have a prescription for
further delay.
MARKET WATCH
BY STEVEN K. BECKNER
Shutdown likely to keep tapering at bay
Gold is going to move; we know that. Its the direction that
can be the problem. Through government shutdowns, rising
interest rates and geopolitical impacts to the U.S. dollar just
to name a few investors constantly are trying to figure out
the direction of gold.
If wrestling with the direction of precious metals isnt your
strength, then move from directional to non-directional
trading. Using GLD for example, you can trade the movement,
regardless of direction. This is done by buying either a strangle
or a straddle.
Both strategies involve buying a call and a put. A straddle
combines the two options at the same strike price while a stran-
gle involves buying out-of-the-money calls and puts. Here well
assume the use of a straddle.
The idea for either strategy is the same: Get enough move-
ment so the profit of one option outweighs the loss of the other,
thereby netting a profit. If gold rallies, then the call profits, but
the put has limited loss. If gold tanks, then the opposite happens,
with the put producing
the profit while the call
has limited losses.
Sounds easy, right? If gold moves up or down, you win. But
its not quite that simple. You can get hurt in a couple of ways
with this trade.
First, because the trade involves buying two options, it now
involves a time decay problem if the underlying doesnt move.
Second, a drop in the implied volatility hurts this trade and
can overshadow any movement that otherwise might have led
to profitability.
Understanding two key elements can mute these risks and help
you find potentially profitable trades without having to guess
direction correctly. Sometimes a decent move is preceded by com-
mon consolidating wedge or pennant patterns. Thus, the first
element is to look for these patterns, as in the chart to the left.
Pattern A preceded a fairly substantial drop over the next
several trading sessions, which is the kind of movement that
can produce profits with non-directional strategies. Pattern B
also preceded a good move.
But the second element also has to be present: Low implied
volatility. Volatility, shown in the lower chart, is the key. If the
volatility is low and doesnt move much lower, then the only
thing you really have to worry about is time decay.
In the above example, the implied volatility is near the low end
of its recent range for both patterns A and B. Heres a straddle
trade example for pattern B.
With 30 days until expiration and GLD trading at $123.32,
the at-the-money (123) straddle is worth $6.00. The implied
volatility isnt at its absolute lowest, but the risk of loss to a
volatility crush is not significant.
Notice also that on this date, the stock appears to be break-
ing out lower, but quickly reverses and five days later is trading
nearly $5 higher at $128.24. Thats a good reason to consider a
non-directional trade rather than trying to guess the start of a
trend. With this move in the stock, the straddle has increased to
$7.55, generating a 26% profit for the straddle buyer.
Once GLD moves, then close or adjust the trade, and look for
another potential opportunity. But keep in mind the two keys:
Look for consolidation patterns that might precede a move, and
make sure that the implied volatility is low. Now you dont have
to pick the direction as long as gold moves enough.
Greg Loehr is a former CBOE market maker trained by Susquehanna
Intl. Group, and founder of the education firm OptionsBuzz.com.
OUTCOME
30 days to
expiration
5 days
later
Change
GLD price $123.32 $128.24 3.9%
123
Straddle
$6.00 $7.55 26%
LOOKING FOR WEDGES
6/3 6/10 6/17 7/1 7/8 7/15 4/8 4/15 5/6 5/20 4/29 8/5
Question: How can I take advantage of a market thats
going to move, but I just dont know which way?
Answer: Trade movement using a strangle or a straddle.
BY GREG LOEHR
OPTIONS STRATEGY
For more options strategies:
futuresmag.com/Options
0.35
0.3
0.25
0.2
0.15
0.2249
140
135
130
125
120
115
110
A
A
B
B 127.75
Lo: 114.68
WHY YOU SHOULD
TRADE FUTURES WITH A
COMPANY YOU THOUGHT
WAS JUST AN
OPTIONS SPECIALIST.
Our innovative, easy-to-use platform was also designed for futures traders.
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DIGITAL EXCLUSIVE 14 FUTURES November 2013
G R A I N S , S O F T S
FUTURES MAGAZINE: You grew up in Chicago but
went into agriculture?
PETE NESSLER: I went to the University of Illinois [for
engineering] but I was looking for something more,
and met some guys in agriculture. I [then] started tak-
ing Ag Econ and Ag Industry courses, which were trad-
ing, hedging and basic marketing. I had great profes-
sors, like Hieronymusall the old guys who wrote most
of the books for futures trading were the professors and
the people I got to deal with.
From there I went to Agra Industries and did cash
trading. At the time Agra Industries, which was one of
the big regionals, owned Farmers Commodities Corp.
Thats where I learned hedging; it was at the height of
the Falklands crisis so gold and silver were going up
and down, soybeans were going up and down and with
England and Argentina [at war], we had all the vessels
trading prices going up and down. So it was learning
by fire. [I had] to make decisions, as small as they were,
[quickly], but it did give me a chance to do see how
hedging, trading and the markets really worked.
FM: How long were you at FCC before you started
the commodity trading advisor?
PN: As the markets started changing, I was trading a
little bit personally. I went to our CEO at the time and
said, what would you think if we started a commodity
fund? We didI was still an employee of FCC...and did
that for about seven years.
FM: What was your trading methodology?
PN: Im a fundamental approach trader, and I look at lever-
aging options. I learned that optionality in the physical
market hedging and within the speculative market gives
you more leverage, at least a pre-notion of your risk. Id
trade a lot of long options, three-way options, vertical call
spreads, trading maybe shorter dated options [during]
crop reports, things like that.
FM: How new were ag options at that point?
PN: They started in the mid-1980s. I really looked at
it as I looked at fundamental analysis, for where the
market can go and from there, looking at what posi-
tion can be enhanced by going out longer term. I also
traded the spread relationships and the cash market.
And that is a big market that you dont get a lot of big
traders in anymore because there isnt enough volume.
High frequency could never trade spreads. Thats more
the fundamental trader. There is a cash connection to
spreads, in theory,to the underlying commodity.
Then I went back into the elevator hedging world,
and the evolution of ethanol started. I went to the CEO
P
ete Nessler, CEO of FCStone, was raised in Chicago but earned his stripes in the grain fields
of Iowa. Working with elevators and farmers, he helped turn Farmers Commodities Corp.
from a group of co-ops into the international brokerage firm INTLFCStone that it is today.
Along the way Nessler was a commodity trading advisor, jump started the firms move into ethanol
and opened and nurtured the firms global presence from South America to Europe to Australia. We
spoke with him about how the agricultural markets have changed during the past 30 years, and how
a small Midwestern firm grew and changed with them.
Pete Nessler is good
Midwestern stock
I NTERVI EWED BY GI NGER SZALA
PHOTOGRAPHY BY SCOTT BELL
Q & A
DIGITAL EXCLUSIVE futuresmag.com 15
Dramatic growth in global
production has changed the
agricultural market that once
was U.S.-centric. But that
comes with its own problems,
especi al l y when getti ng
product to market, says ag
market veteran Pete Nessler.
DIGITAL EXCLUSIVE
and said this is a big business that is going to change how U.S.
ag markets look, and a colleague and I literally got on the road
and started [visiting] the new wave of ethanol plants around
2000, 2001, and grew that business for the company.
FM: How did you recognize that opportunity?
PN: When we looked at ethanol plants and really [reviewed]
the potential green sites that were going to be brand new and
how many plants were going to be built, we started [noting] the
impact locally, that is, how much corn wasnt going to go to
export or wouldnt go to an end user. We knew that there was
going to be a disallocation, number one, and number two, [there
would be a change in] the supply and demand curves [if] we
met the RFS (renewal fuel standard). I dont think people fully
understood the implications of how much more corn was going
to be used locally, domestically. A 100-million gallon plant uses
almost 40 million bushels of corn; that literally is one county in
Iowa production, and that county was feeding hogs, cattle and
everything else. So once (I) started going through the numbers,
[I thought] something is not going to add up; corn is not [going
to continue to] sit at $2.50 [a bushel] anymore. That was the
beginning.
FM: So the ethanol business in the United States is still growing?
PN: Its actually developed into a crush margin, like how a refiner
looks at a crack spread. In an ethanol or bio-diesel plant, with
corn youre making ethanol, DDGs (distillers dried grains), and
if you have the third aspect, CO2. [Those are] the three products
that come out of [the corn]. And you get corn oil off the DDGs,
which theyve now refined, and corn oil can go into bio diesel
or feed or pharmaceuticals. So the basic premise of an ethanol
plant from where it started to where it is vertically integrated,
and at the end of the day its all margin related.
And now with more plants than 10 years ago, theres more
competition. And pretty much were at full usage from a corn
basis; weve hit the top of what was mandated for corn for etha-
nol. Were not in an upward slope anymore; weve peaked out at
5 billion (bu.) of corn for ethanol.
But the rapid transformation on the upside is what I think
surprised everyone in the corn market because the demand was
so exponential. And the mandate is nearly negligible now. When
you look at ethanol [the last few years], it was as big as the feed
number. And this year it is projected to be four times the export
market. Projected for ethanol in 2013-2014 [is] 4.9 billion bush-
els of corn; exports projected for corn are 1.225 billion bushels.
So ethanol is now a driver. And with all the arguments of the
RFS, and all the good and bad and big oil, we now have out of
the demand base of 12.6 billion bushels of corn, almost 5 billion
in ethanol. So if we got rid of ethanol, agriculture would have a
[crash] and the land prices and everything [would drop]. So we
had to live through some of the heartache and misery, but now
its just part of the equation.
FM: So is food for fuel a bygone argument, like peak oil?
PN: I think it is. Out of ethanol you do get distillers grain, and
that is fed to cattle and dairy, and now its even having inclu-
sion rates in hogs, and [were] getting corn oil off the back end.
And depending on [type of plant] we get CO2, that goes into
hydroponics and such.
And when you look at it, it was a local product; it was done
by a local community with local farmers, it was financed by
Midwestern banks and such so it is exactly the root of what we
dealt with. [And] it has reinvigorated middle America. Weve
lived through the hysteria because we have globalized commodi-
ties, [for example] we have corn being grown in Brazil and all
over the world.
FM: What about the financialization of commodity markets?
Are you seeing an impact on price discovery?
PN: We are into a carrying charge market now. The backward-
ation or inverted market we had was just fine when the carry
out usage ratio charge of corn was 5%, now all of a sudden were
projecting 14% carry out to use. So we are building carries.
Im not one to be a demagogue on high-frequency and algos,
they have their places, and within agriculture, we dont have
the depth of the market you get in the dark pools in equities.
We will get some spikes and literally the market comes back.
More than not when you see that big trade blow in, as soon as
theyre done, the market goes back to where it was. You dont
see that overall manipulation, [especially] with the CFTC and
the oversight today.
We had more issues back in the 1980s with some grain com-
panies and different trading houses trying to corner soybean
markets, and the soybean trade. Remember the name Ferruzzi?
You had more of that happening with squeezes in the market. A
high-frequency trader is just that, hes in and hes out. Hes not
a position trader for more than a nanosecond. HFT is there just
to trade in and out, and in a commodity market where you have
an underlying physical asset that is there, I dont see it as a big
issue. I mean, [HFT] is part of the market makeup.
FM: Beyond HFT, what about other players coming in, like
investment banks?
PN: Within agriculture, I dont think youve seen as large of a
change by the investment banks. The investment banks are more
in the energy sector, which is a much larger globalized commod-
ity. Beside your ABCDs, which all have a place in the business,
you see new companies emerge that are into that, like the Nobles,
Olams, Glencoreyouve got a lot of different trading houses
and they are all part of the equation. At the end of the day, none
of them predetermine what the price of corn will be three or six
months from now. They are hedging, doing risk management
or trading on a perception, but [bottom line], agriculture is a
fundamental market and if we have another drought and less
acres, or big acres and a big crop, that will [determine the price].
You can get into how the world globalized soybeans, or the
inverse or backwardation of soybeans this year. Thats some-
thing that [we may be concerned with] because delivery points
are within the U.S. [although theres] as big of a supply [of grain]
now in South America as [we have] in the U.S., even bigger.
Thats more of a fundamental key. Its projected now that next
year Brazil will have 88 million metric tons of soybeans, which
Q & A continued
DIGITAL EXCLUSIVE
Go to futuresmag.com/nessler
for an unabridged version of this interview.
would be bigger than this years crop in the United States. Then
you throw in Argentina at 50-60 million metric tons, yet were
all trading Chicago, [and the] delivery points [are a problem].
So like this past year, we may not have had a lot of soybeans
here, but theyre somewhere else in South America. Thats where
you get the disallocation. [We dont] have a true delivery point.
FM: Is one problem that the delivery mechanism isnt set
up in Brazil?
PN: There are two ports being built in northern Brazil, the
other port in the southern part in Santos. When these north-
ern ports [are complete] it will work, but [Brazil needs] railing
and trucking infrastructure. They are growing [all commodi-
ties] but they dont have the [ports] like in the U.S. And we see
cash basis swings in Brazil. Ive been there three times in the last
five months , and the infrastructure [is not there yet]. Brazilian
farmers are driving 1000 kilometers (about 600 miles) to deliver
soybeans, where in the United States that doesnt happen, its on
a railroad or a barge. But this is actual farmers in trucks driving
for a day to deliver soybeans because of this disallocation.
FM: It seems agriculture has been U.S.-based, but now is
global. Was it always there and we werent paying attention?
PN: [One reason for global growth] is we had very high prices
in 2005 and beyond that brought in more production globally.
Plus new players that didnt really exist 15 years ago and players
becoming larger have helped, such as Glencore, Noble, Olam,
Gavillon, to name a few.
We differentiate our firm where we started as a clearing firm
office in Chicago, but we were based in West Des Moines, Iowa.
And then we opened offices [throughout the Midwest]. We have
taken an approach as a firm that we go to where the customers
are. Instead of trying to pontificate from an ivory tower some-
where, we get people locally in that area, we teach them what
we do as a firm. Weve got guys from elevators, customers, farm
kids, on the agricultural side at least. So when we went down
to Brazil, we hired people from customers from that area. We
put a big emphasis 10 years ago on Brazil; we saw the evolution
and [now have] six offices, 60-plus employees down there. In
the last three years we opened two offices in Paraguay, which is
[the] third largest bean producer [in South America].
Also in Brazil, for instance, with the capabilities of the firm
we are doing the forex risk, and that differentiates us from other
people. So what we do is besides the risk management of the soy-
beans through our typical FCM unit, in our consultant unit we
now are utilizing our FX services to lock in forwards on them. We
have a lot of customers that are shipping overseas or buying, and
our global currencies[unit] is a treasury function within the com-
pany. This is the integration of the FCStone per se with the legacy
INTL business. So now we have a solution for the customer that
is not just going to the firm to clear through the firm, but is there
also to partake in FX risk, forwards risk and anything like that.
We trade 150 currencies more than any bank. We have a lot
of relationships; many tier-one banks utilize us because its not
worth their time to have these relationships; we do $2 billion a
month of global payments.
FM: FCStone saw the global expansion a long time ago?
PN: When we did the merger (with INTL) on Oct. 1, 2009, INTL
pre-merger was in Argentina, London, Dubai, Singapore, and
in New York with their FX business. What we had in Brazil, they
had put part of their business in Brazil that we had started. They
had Singapore and we took part of our business and put it back
into Singapore. It worked well, there was no overlap.
FM: Can you explain INTL?
PN: Before INTL, it was called International Assets Holding; it
was a public firm doing precious metals, base metals, FX and
equities. They do in equities what we do in futures. They are
extremely large in the equities business [in ADRs]. They were
ranked the number one market maker in dollar volume in 1,700
securities in 2012. So if youre looking at a foreign stock, we are
the market maker in that. Its based out of Florida, and they
make markets in 10,000 securities. In precious metals, they did
$67 billion in turnover last year.
When we merged four years ago, INTL had about 180 people,
we had 420. Today we sit at 1,050. So it wasnt one of those put
two together and cut half out; weve almost doubled in size
in almost four years. And thats where the synergies work: We
werent into (forex) and they werent into ag.
futuresmag.com 17
DIGITAL EXCLUSIVE
They are trading in the debt market thats down in Florida.
Its the same thing to a degree of what our swap dealer does
but theyre doing it in the securities world.
FM: What about other groups entering the ag business, like
hedge funds and private equity buying land, trading firms buy-
ing processinghas this been good for your group?
PN: Institutional land purchase is overblown; big farmers incor-
porate anyway for tax purposes. I dont see investment banks
owning a bunch of ground [a problem], I mean they still have to
hedge. That hasnt hurt us at all. New players in the market? Not
a big deal. What we have to offer as a swap dealer, we can offer a
whole suite of services. Thats a big plus for us.
Of the original 65 swap dealers, we were the only non-bank.
because we make markets in the FX world and within our ag
side, so we met the criteria of being a swap dealer. In talking to
people in that world, theyre seeing that, yes, they need to be
swap dealers as well. So besides big energy companies, I think
youre going to see big FCMs [become swap dealers as well].
FM: Your strength has been agriculture, but youve moved
into softs markets?
PN: Yes, we felt expanding into Brazil was a core area of growth.
So we looked at different firms (and continue to do so), smaller
niche entities, and purchased a softs group and now were one
of the largest coffee traders. And piggy-backing off that, we pur-
chased a group that just does coffee, so now weve covered both
entities. In natural gas we picked up a group [FC does 20-25% of
natural gas commercial and residential consumption in U.S.], so
now we work with the big gas companies.
Ill be very honest, when you look at FCMs today the grain
markets for the last two to three years: Weve had three years,
almost four years of smaller crops, theres no carrying charge
market, low open interest and we dont have the carry for the
elevators. So what [FCStone has] done is disperse ourselves, and
now all of a sudden were a large player in coffee, sugar, palm oil,
cotton all the other areas that are agricultural baskets that
arent Midwest-, U.S.-centric. We had to [get out of being too
focused on grains] because if thats your only card on the table,
youre not going to survive [because] youre at risk of weather,
and youve got other parts of the world that are going to be as
big or bigger than the U.S. in, for instance, soybeans.
FM: What are three biggest changes in clearing and broker-
age over the last 30 years?
PN: Obviously the notable fall of one FCM. Theres a lot of repu-
tational risk at stake for everybody and the institution itself. So
that gets people worried: Is their money really safe, is it really
segregated?
The lower interest rate environment the last several years; we
have to diversify because in the old days we could break even
but make money on interest income.
And the new Dodd-Frank compliance residual interest deal is
a major discussion point of how soon margin calls or the T or
T+1. Weve been, along with our cohorts here, trying to explain
why we feel T+1 is suitable because from a credit line facility,
you cant have enough money [for] a one-day exceptional call,
doesnt matter if youre a big bank or a mid-size firm.
Its really the last four to five years [that have] been the larg-
est change. Computers really came in, electronics really came
in, Dodd-Franks implementation going on right now, the rule
making and then the couple of defaults by FCMs [havent] really
helped the case.
FM: Lets talk about that; you folks were using Sentinel as a
custodian, and that didnt end well.
PN: I cant get into that much because theres still legal issues,
but that was a customer seg issue and thats why we have lawyers.
Were Midwest-based and I can tell you going way back we
carry credit insurance on many firms. Back when Enron was the
soup du jour, and when they went under, we had a small trade
we had done with them, nothing major, but guess what? We
had insured [ourselves] against Enron. People asked us why do
you do that? and its because the structure of our board, if its
not too cost prohibitive, why not insure it? Its a very different
thought process than some of the other [FCMs].
FM: Seems like you guys took a different path to growth than
the MF Global mad dash.
PN: We take an approach that may be more costly in [the] begin-
ning, but weve realized that as we go into new frontiers the bar-
rier of entry is either buy into it and either be right or wrong
real quick, or take your time with some prudence and build up,
learn the business, know the local trade and work from there.
Q & A continued
Q & A: Pete Nessler continued on page 52
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G R A I N S , L I V E S T O C K
MARKETS
A winters tale: No dormancy for
grains or livestock
BY RI CH NELSON
Plentiful bounty may mean lower prices in many grains, but tight carry over and
potential weather and transport issues globally could mean volatility. And then theres
the government shutdown.
T
he transition from fall into win-
ter trading is an important turn-
ing point for grain markets. By
now the big questions on the years sup-
ply are answered. Actual harvest results
came in better than expected. The build-
up in soil moisture, because of heavy
spring and early summer rains, was a key
factor in alleviating late summer dryness.
The question now is how well demand
will be able to accept this supply.
Grain supply fluctuations from plant-
ing through harvest determine almost
all of grain pricing from spring through
fall. During the winter, though, these
markets typically settle down. It is at this
time that outside market issues exert a
little more influence. Changes in the
U.S. dollar, Federal Reserve policy and
money flow between equities and com-
modities are all issues to consider in the
weeks ahead.
Corn: Abundant stocks
While the trade has been dialing up its
expectation of yields in recent weeks this
also has been balanced by revisions in
acreage. Allendales most recent produc-
tion estimate, of a record 13.827 billion
bushels, is determined from a yield of
158.2 bushels per acre and an acreage
decrease. On top of a record production,
the U.S. Department of Agriculture
(USDA) recently recognized a higher
revision in old crop ending stocks.
A sharp decline in corn prices normal-
ly will spur demand and, generally, 30%
to 70% of a years increase in production
can be offset by rising demand. But world
feed buyers finally are getting adequate
corn exports: At last count 45% of USDAs
whole-year sales goal was sold. That is
an impressive total for this time of year.
Livestock numbers will be slightly higher
than last year. Chicken and pork expan-
sion almost will be offset by a 5% increase
Ethanol effect on corn
Wheat production in question
Live cattle and beef demand
For daily grains updates, go to
futuresmag.com
Corn yields for 2013 have been higher than in years past, although feedlots have increased
usage as well. Still, ethanol needs are up only slightly, meaning corn heads lower.
DOES HIGHER CORN PRODUCTION MEAN LOWER PRICES?
Source: Allendale
14.5
14.0
13.5
13.0
12.5
12.0
11.5
11.0
10.5
10.0
U.S. corn production
13.1
14.1
12.4
14.0
12.4
14.0
13.8
10.780
13.843
13.827
12.1
B
i
l
l
i
o
n

b
u
s
h
e
l
s
2008 2009 2010 2011 2012 May Jun Jul Aug Sep ALDL
futuresmag.com 21
in cattle feedlots numbers for 2014. The
USDAs models imply that quantity fed
per animal fluctuates sharply with corn
supplies. Feedlots can switch to distillers
grains, wheat and other products based
on price. With a few more head, and more
corn per head feeding, we have no qualms
about saying a 5.050 billion feed and resid-
ual number, up 575 million bushels from
the old crop numbers, is reasonable.
Ethanol will not help mop up this years
extra supply. Although producers are mak-
ing strong profits of 50 cents per gallon,
they are limited by the blend wall. The EPA
adjusted the 2014 ethanol blending man-
date down from 14.4 billion gallons to
13.0 in October. Allendale estimates that
will limit corn use in the 2013/14 year to
only 4.7-4.8 billion bushels, assuming only
moderate RIN (Renewable Identification
Number) usage.
An ending stock of just over 2.0 billion
bushels could give down potential to
$3.70 December corn. While corn futures
currently have posted a minor rebound
off their early October lows, we look for
one more attempt at sub $4.20 levels.
Soybeans: Tight ending stocks
Unlike corn, soybeans are still just getting
by. Much of the U.S. picture actually will
be determined by the current soybean
planting and spring harvest for South
America. We currently forecast U.S. end-
ing stocks at 160 million bushels. That
is a little higher than the old crop stocks
that recently were revised from a tight
125 million bushels to now 141 million
bushels. While these stock changes sound
trivial, the new crop forecast is based on
a usage of 3.1 billion bushels. A minor
change in that U.S. demand picture can
have a sharp impact on these ending
stock numbers. China had flocked to the
U.S. export market when Brazil focused
on corn exports this fall as exportable
soybean supplies started to run low.
While the United States is the only shop
in town right now, the trade expects a
new record to be posted for Brazil and
a near record for Argentina. Farmers
in South America generally plant from
mid-September through early November.
With the corn planting delayed in the
first four weeks of that window, the trade
expects a good increase into soybeans.
Without any production problems, the
U.S. export market would be only a tem-
porary stopping point for world buyers.
Soybean futures could fall to $12.50 per
bushel in November, then even lower as
spring rolls around. However this is not a
done deal yet. The South American crop
is not even fully planted. And even if big
supplies are harvested, the trade has not
forgotten the port mess in Brazil from
this past spring and summer. If grain
companies try to cram an even larger
crop through those ports, which have not
seen an increase in capacity, it certainly is
possible a few extra orders for U.S. prod-
uct could be made. It does not take much
to turn a 160 million bushel ending stock
and a slightly bearish forecast into a 120
million bushel estimate and a sharply
bullish forecast.
Wheat: Supply issues?
While corn and soybean markets have
spent recent weeks revising yield estimates
higher, the wheat market has had to revise
its expectations of adequate supplies. The
summer and fall of 2013 marked a return
to normal supplies on recovery from last
years world production decline. In recent
weeks there has been discussion sug-
gesting supplies during this winter and
beyond may not be as good as expected.
Argentinas wheat areas have seen con-
tinued weather problems since June. The
trade feels they may go back to last years
low production level of 10 million tonnes
or perhaps even lower. Many question
whether China, the second largest wheat
producer, will see further revisions lower
in the coming months. The newest area of
concern is now Russia and Ukraine. While
they have just wrapped up a bountiful
harvest, recent heavy rains have delayed
their normal September through early
November winter wheat planting. Those
fields may be left unplanted over the win-
ter and perhaps planted with a spring
crop such as corn.
The result is that the world may lean
on U.S., Canadian and European Union
supplies more than expected. Instead of a
sharp resurgence in wheat stocks back to
burdensome, they will simply be left as a
little less than average. Before the Russia/
Ukraine planting issues, we felt $6.90 per
bushel was an adequate upside target for
December Chicago wheat. With them
included there is potential for up to $7.20
per bushel.
Lean hogs: Lower prices?
There has not been any agricultural
market more affected by the govern-
ment shutdown than lean hogs. Over
the past 15 years, cash markets have
been automating pricing decisions
based on the various USDA summary
reports on pricing. In addition, with-
South Americas soybean crop is still in question, and that puts more pressure on U.S.
ending stocks.
SOYBEAN CONUNDRUM
Source: Allendale
90
80
70
60
50
40
30
20
10
0
Soybean production
49.5
53.5
82.0
88.0
M
i
l
l
i
o
n

m
e
t
r
i
c

t
o
n
n
e
s
10
11
12
13
Argentina Brazil
MARKETS continued
out the daily and weekly reports on
slaughter levels, the trade cannot assess
accurately whether the USDAs recent
Hogs and Pigs report is correct. That
report implied that the recent run of
low slaughter levels would be fixed
soon. In fact, it suggested we may see
weekly kills running 1% over last year by
the end of October. This also is import-
ant as October and November are the
seasonal heavy supply period.
That report also suggested there would
be minimal impact from the hog virus
PED. Much of the industry had previ-
ously been dialing in net year-over- year
decreases from December through March
because of this problem. If the USDA is
correct about the winter supply period,
then December lean hog futures will
decline below $84.00 per cwt. Most of
the industry is taking a wait-and-see
attitude on that potentially bearish idea.
Hopefully, by early November we will see
if the USDAs survey of producers was
correct. On a seasonal basis, hog futures
typically decline until mid-November.
By then the trade has dialed in where the
correct cash hog low will be.
Live cattle: Shutdown hurt demand?
Placements of new calves and feeders
into feedlots have been lower than last
year since May. The surprising mois-
ture pattern in the Plains this summer
recharged pasture ground. This led to
many producers going for cheap weight
gains while they wait for cash grain pric-
es to fall. Some producers even have sug-
gested that expansion is underway. Nine
of the top 12 beef cow states have seen
resurgence in pasture conditions. This
means females that would normally be
going to the feedlot will be held back to
increase the beef cow herd. This actual-
ly helps lower beef production levels in
years one and two of this cycle. While
expansion is not completely agreed on
in the industry, no one can argue that
Q1 and part of Q2 cattle slaughter will
be down sharply.
While we are clear supply bulls for
cattle, we cant ignore some concern
for beef demand from the government
shutdown. Government workers and
many companies that rely on government
business are affected. The last extended
shutdown, starting in December 1995,
saw a 3.27% decline in live cattle futures.
The other extended shutdown began in
1978. Alhough there was only a minor
change in the December cattle price from
the start to the end of the shutdown, we
were interested to see that the price high
down to the price low within the shut-
down period was a huge 7.2%.
Just like this year, the first few days of a
shutdown actually saw a rally that peak-
ed on Oct. 6. For the short-term market,
we are not out of line in suggesting the
December contract could see weakness
that pushes past $128.62 per cwt. because
of this problem. We would prefer a bear
spread in this example rather than out-
right shorts in futures. For the long-term
picture we still feel the deficit in supply
for Q1 is too juicy to ignore. After our
expected setback in prices in October
and early November we are looking at a
$140.00 per cwt. objective for February
2014 futures.
Rich Nelson is Director of Research at
Allendale, Inc. in McHenry, Ill. Allendale is
registered with the CFTC and NFA and is a
member of the NIBA.
The U.S. government shutdown has cut off the usual information available regarding
hog slaughters, which had been seen as lower but actually could be 1% higher than
October 2012.
The U.S. wheat market has taken a hit because of higher corn production, so the world
is looking to South America, Russia and the Ukraine for supplies.
HOG SLAUGHTER IN THE BLIND
LOOKING EAST FOR WHEAT
Source: Allendale
Source: Allendale
2,500
2,400
2,300
2,200
2,100
2,000
1,900
1,800
1,700
50
40
30
20
10
0
Hog slaughter
The sharp decline on some weeks represents holiday shutdowns.
Reduced 2014 wheat harvest
22
50
15
42.5
M
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t
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e
s
M
i
l
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i
o
n

t
o
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n
e
s
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2012 2013 2014
Ukraine Russia
2011
2012
2013
W
ith the summer of 2013 now
well behind us, harvests are in
full swing through much of
the United States. Farmers are busy fill-
ing their barns with the bounty of a hard
summers work.
For investors, however, its a different
story. Many traders who have picked up
a newspaper in the past 12 months are
weary of playing the will they/wont
they game with the Federal Reserve.
Every time Bernanke blinks, the stock
market jolts one way or the other. Weve
seen a fascinating bull run in stocks and
yet investors still dont trust it. We really
want to accept it, but for some of us, it
just doesnt feel quite right.
Instead, you can leave the whims of
the Fed behind and focus on a market
whose price direction has less to do with
unknown policy changes and more to do
with core supply/demand fundamentals
and seasonal cycles. The basic agricul-
tural markets offer these qualities.
And none is more basic or more inter-
esting right now than corn. For traders
looking to harvest some bounty of their
own this fall, they can consider a simple
strategy that can profit without taking
wild risks, having perfect timing or even
picking outright price direction.
Banner year
Before you can understand how to make
money in the corn market, you must first
understand the supply/demand factors
driving corn prices. These fundamentals
are paramount in establishing the long-
term price direction of any commodity.
The 2013 season has been a banner
year for corn production in the United
States. By late July, the U.S. Department
of Agriculture was projecting the United
States would produce 13.95 billion bush-
els of corn this year the most ever.
It is true that corn farmers have increased
corn acreage in response to record demand.
However, available supplies are likely to
outpace demand by a wide margin in the
2013-14 crop year. Ending stocks for next
year are pegged at a whopping 1.959 bil-
lion bushels. This is almost double 2012
ending stocks and eclipsing this years pro-
jected ending stocks by nearly 150% (see
Leftovers, right). Ending stocks represent
the amount of the commodity left over in
a given crop year (usually September) after
all demand has been met. This number
can cast a wide shadow over price direction
throughout the year.
The reasons for this increased corn
production are many. At $5 to $7 per
bushel, corn is a profitable choice for
farmers. As global demand gradually has
pushed higher over the past several years,
so have corn prices. Farmers respond by
growing more corn to take advantage of
the higher price brought on by demand.
The agricultural industry has more
than held its own in meeting rising glob-
al demand for grains, corn in particular.
The genetically modified seed industry
has produced higher-yielding, and pest-
and drought-resistant crops. Along with
better irrigation and farming skills, this
has resulted in not only higher yields but a
larger growing region for corn. This is why
corn is now seen growing in the former
wheat fields of the Midwest and former
cotton and peanut fields of the South.
Corn acreage accounted for 25% of
U.S. fields in 2000. This year it was 30%.
More impressive, however, is the growth
in yield. In the early 1980s, an acre of
corn could be expected to yield about 102
bushels per growing season. In 2013, that
figure is 157 bushels.
Options strategies can be used to take advantage of fundamentally and seasonally
driven price changes in the agricultural markets.
Harvesting profits from
corn fundamentals
BY MI CHAEL GROSS
TRADING TECHNIQUES
C O R N O P T I O N S
Ending stock impact
Selling corn options
For more from Michael, go to
futuresmag.com/Gross
Weather is always a possible concern,
but while hot temperatures and low
moisture hampered conditions in 2012,
this year has been much more favorable.
Opportunity knocks
Before you go running out to short corn,
hold on. The analysis described here is
provided to give perspective; it is no secret
to the market. Prices held at elevated lev-
els through much of the spring while the
2013 crop was planted. However, as it
became apparent that weather was favor-
able and the crop was developing nicely,
prices fell. Corn prices tumbled more than
15% from the highs in late June through
the corn pollination period in July (see
Corn slide, right).
While there still may be opportunities
for traders to short corn on rallies this
fall, the greater opportunity may be to do
the opposite of the crowd and position
for a harvest low. Here is why.
In commodities agricultural com-
modities in particular we have a tool
that other markets dont enjoy: Seasonal
tendencies. While not perfect, seasonal
analysis can help to illustrate certain sup-
ply/demand fundamentals that tend to
take place at different times of the year.
In corn, the U.S. harvest comes in the
fall, sometimes starting as early as late
August and finishing in late October/
early November. Prices tend to peak when
supplies are lowest and bottom when
supplies are highest. Thus, at harvest
time, when supplies are higher than they
will be at any time all year, economics dic-
tates that prices should be at their lowest.
While seasonal charts are an admittedly
blunt instrument, the chart for corn seems
to bear out this economic phenomenon
(see Seasonal trends, page 45). While
this chart is only an average of the past
15 years, it does seem to reveal a tendency
for corn prices to bottom in early October.
That this happens to be right in the heart
of the corn harvest is no coincidence.
Thus, we have the term harvest low
used by ag futures traders around the
globe. Once a harvest low is achieved,
prices often begin to increase gradually as
demand begins to eat away at new supplies.
Encouraging for traders who follow sea-
sonals, corn appears to be correlating well
to seasonal averages in 2013. While there
obviously is no guarantee that prices will
follow the seasonal average, there may be
an opportunity for investors to consider
during corn harvest time 2013.
Picking a low in any market can be
quite profitable for a trader who times it
right. Unfortunately, it is also difficult.
The road to riches from picking lows in
bear markets is littered with the financial
corpses of those who got their timing off
by even a hair. Its nearly impossible in
futures unless you have deep pockets and
nerves of steel. There is a better way to
play this without assuming the risk of an
outright futures position, however.
In most cases, buying options is a
sucker bet. Too many new traders get
lured into it as a low-risk way to play the
futures markets. (Your losses are fixed!)
However, buying options has a low suc-
cess rate. The odds are high that long
runs of small losing trades eventually will
empty your trading account.
A better route is selling options. Yes,
you take on more risk than buying, and
the profit potential is limited. But by sell-
ing an option, you put the odds of suc-
cess in your favor. And the risk can be
managed. You just have to do it yourself.
futuresmag.com 27
Corn prices took a precipitous fall when the trade began to factor in a record harvest.
Ending stocks in 2013-14 are expected to be nearly 150% higher than this seasons tally.
CORN SLIDE
LEFTOVERS
Source: Barchart.com
Source: USDA Wasde Report (July 11, 2013)
250K
200K
150K
100K
50K
0K
600-0
590-0
580-0
570-0
560-0
550-0
540-0
530-0
520-0
510-0
500-0
490-0
480-0
600K
500K
400K
300K
200K
80%
70%
60%
50%
40%
30%
20%
10%
0%
Feb 13 Mar Apr May Jun Jul
73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13
Corn, daily
Ending corn stocks as % of total usage
USDA 2012/2013 estimate assumes planted
acreage of 97.4 million acres
%

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Trading Techniques: Gross continued on page 43
A
sk anyone on Wall Street, What
is the state of the market? and
chances are youll get one of three
answers: Bull, bear or sideways. To the
casual trader, these terms paint a rough
picture of where the market is moving.
But to a certain concept in mathemat-
ics, these terms precisely describe where
prices are heading.
This concept is hidden Markov mod-
els (HMM). It was developed by Harvard
Ph.D. mathematician Leonard E. Baum
and his co-workers. The premise of the
model is that the market is in one of five
states super bear, bear, sideways, bull or
super bull at any given time and tran-
sitions between states obey the Markov
property. That is, transitions are depen-
dent only on what the markets state was
one time interval before and not any ear-
lier. How the market switches between
the five states is indicated by transition
probabilities that tell us the probabilities
of one state transitioning to another.
The assumption that the market obeyed
the Markov property occasionally was
thought of as a good one because it removes
the problem of lag. This occurs when a cur-
rent calculation holds little value because it
is based on price action much further in the
past. The further back you go, the less of an
effect price action should have on current
trading decisions.
Hidden Markov models are making inroads into institutional trading. Their
applications are broad. One, forecasting future indicator values, can give you
an edge trading the currency and commodity markets.
The profitable, hidden and
Markovian couple of
Swiss and gold
BY DONNY LEE
TRADING TECHNIQUES
F O R E X , C O MMO D I T I E S
Markov models
Five states of the economy
Trading intermarket relationships
The basis of HMMs is that the market is in any one of five states and switches to
other states at a probability that depends on its current state: When the market is in
a bull state (wb), it has a 0.15 probability of switching to a bear state (wu) and 0.3 to
a sideways state (r).
STATE TRANSITIONS
Source: Donny Lee
P(wu|sb)
P(sb|wb)
P(wb|sb)
P(wu|wb) = 0.15
P(wb|wu) = 0.1
P(r|wb) = 0.3
P(r|wu) = 0.6
P(wu|r) = 0.25
P(wb|r) = 0.35
P(r|su)
P(su|wu)
P(wu|su)
Super bull
Bull
Super bear
Bear
Sideways
Just as how we know a bear and a bull
market behave differently, each state is
given a different probabilistic distribu-
tion of the observations it can output.
Observations are any form of physical
quantity we can measure from the market,
namely price and indicators. Their uses are
two-fold. One, if we know that the market
is in a certain state, we can infer from that
states distribution what the next observa-
tion could be. Two, a sequence of observa-
tions can be used to figure out the state of
the market (see State transitions, left).
Over the last decade, HMMs have been
creeping into the arsenals of some hedge
funds. Because of their logically sound
modeling process and subtle applica-
tion of the Markov property, quants have
found good use of HMMs in generating
profitable trading signals.
However, HMMs showed their limita-
tions when the time came to incorporate
the next wave of trading techniques. Hedge
funds experienced a gradual realization that
more than one dimension of data was need-
ed to outwit the market. Multi-time frame
trading techniques in which two time frames
were studied together were explored. Pairs
trading in which prices of two assets were
analyzed at the same time was the emphasis.
Intermarket analysis in which the forecast-
ing of an asset in one market considering the
dynamics of another asset in another mar-
ket was developed. The early form of HMMs
werent conducive to integrating these new
ideas and needed to be extended to allow for
this possibility. Thus, the coupled hidden
Markov model (CHMM) was born.
Unlike Baums original HMM, which is
standard literature in applied mathematics,
the CHMM is new research starting around
the mid-2000s and doesnt have a canonical
formulation. While the CHMMs developed
by researchers from different universities
vary in their specifications, all of them
share a common underlying theme: To
take two HMMs and couple them by way
of their transition probabilities.
Lets start by giving our two HMMs
names. HMM1 will model the currency
market, and HMM2 will model the com-
modity market. Both of them make up
our CHMM. Just as before, as time pro-
gresses, the state of each market will
switch to another state with certain prob-
abilities. Unlike before, this probability now
depends on that markets and the other
markets current states. Therein lies the
coupling between both markets (see Two
HMMs coupled, above).
With the two markets represented in
our model, we also need two observations
to track, namely the price or indicators
of our currency and of our commodity.
We feed both observation sequences into
our CHMM to have it reconfigure itself
to best represent each market.
The result is a model with the predic-
tive power to forecast the next observa-
tion for both the currency and the com-
futuresmag.com 31
Glimpsing the price action of USD/CHF and gold, we reasonably can infer that they
are inversely correlated. CHMMs are utilized best when working with pairs of assets
with this kind of relationship.
USD/CHF VS. GOLD
Source: CQG Integrated Client
1750
1700
1650
1600
1550
1500
1450
1400
1350
1300
0.97
0.96
0.95
0.94
0.93
0.92
0.91
0.9
8/2/2013 0:00 27/2/2013 1:40 15/3/2013 22:00 4/4/2013 19:20 23/4/2013 17:00 10/5/2013 14:20
Price of USD/CHF and Gold (08/02/2013 to 13/05/2013)
P
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P
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USD/CHF Gold
In coupled hidden Markov models, state transitions in one market are dependent on
that markets and the other markets previous state. As seen here, the currency mar-
ket has a 0.5 probability of switching to wb when considering its previous state of wu
but a 0.3 probability when considering the commodity markets previous state of wu.
Seen differently, an r state in the commodity market gives a 0.15 probability that the
currency market switches to wu and a 0.2 and a 0.4 probability that its own market
switches to wu and wb respectively.
TWO HMMS COUPLED
Source: Donny Lee
P(wb
1
|wb
2
) = 0.15
P(wb
1
|wu
2
) = 0.3
P(wb
1
|wu
1
) = 0.1
P(wu
2
|wu
1
) = 0.5
P(wb
1
|r
1
) = 0.25
P(wu
2
|r
1
) = 0.3
P(wu
1
|r
2
) = 0.15
P(wb
2
|r
2
) = 0.4
P(wu
2
|r
2
) = 0.2
P(wu
2
|wb
2
) = 0.3
Currency market Commodity market
modity markets. Throughout coupling
the two HMMs, we have not removed
the Markov property when switching
between states. The positives of HMMs
are retained, the problem of lag kept bur-
ied and the possibility of incorporating
another dimension of data made avail-
able. Quants were quick to explore pairs
of assets to couple for the CHMM.
For us to capitalize on the predictive
powers of a CHMM, it is best to use it to
model two either strongly correlated or
strongly uncorrelated assets.
The fundamental relationship between
gold and the Swiss franc helps us choose
these markets. One, it is believed that dur-
ing times of economic unrest, investors
tend to dump the dollar in favor of gold.
Because gold maintains its intrinsic value,
it implies a negative correlation between
the dollar and itself. Two, following a
gold-selling program, the Swiss National
Bank held 1,290 tonnes of gold in reserves,
which amounted to 20% of Switzerlands
assets. Therefore, the Swiss franc and gold
should move in opposite directions. Both
of these relationships has us believe that
USD/CHF and gold are negatively corre-
lated; the rise in one implies a fall in the
other (see USD/CHF vs. Gold, page 31).
We now devise a trading strategy involv-
ing USD/CHF and gold coupled with a
CHMM. First, we define the observable
quantity. This would be the physical mea-
sure of the asset used in the rules when
generating trading signals. If we are trad-
ing the tails of a distribution, it would be
the CCI indicator. If we are riding a trend,
it would be the ADX indicator. In line
with our strategy, we define the observable
quantity to be the RSI indicator. Thus, the
dynamics of USD/CHF and gold will be
represented by their RSIs.
Second, we need to construct our strat-
egy. With our goal being to illustrate the
features of the CHMM, well use a simple
four-period 10-minutes RSI, buying when
it crosses over 20% (oversold) and selling
when it crosses under 80% (overbought).
Well use the CHMMs forecasted USD/
CHFs RSI value instead of the actual RSI.
While it seems we need to decide on a fil-
tering rule when incorporating golds RSI,
we dont. The beauty of the CHMM is the
theory behind state switching nurtures this
relationship: The coupling between USD/
CHF and gold. By periodically loading the
four-period RSI values of USD/CHF and
gold into the CHMM, itll reconfigure
itself during each load, figuring the rela-
tionship between USD/CHF and CHMM
that best makes sense. Any prediction made
for USD/CHF will then take into account
both the dynamics of USD/CHF and gold.
Finally, we set a one-to-three risk-to-
reward ratio using two-times and six-
times the 12-period average true range
for the stop loss and profit target, respec-
tively. Furthermore, well run our strat-
egy first with fixed sizing and then with
dynamic sizing where the size is defined
as a fixed amount multiplied by the prob-
ability at which the CHMM switches
states. Basically, we are aligning our con-
fidence in each trade with the models
confidence in predicting the next state
TRADING TECHNIQUES continued
Looking at the 10-minute chart for USD/CHF on Feb. 7, we see how well the CHMM pre-
dicts a change in market state. A switch in the CHMMs state from super bear to super bull
at 20:30 foreshadows the actual turn in the market where USD/CHF does a large move
from a low of 0.9288 at 20:30 to a high of 0.9401 at 23:50. Signal-wise, the CHMMs RSI
turns away from an oversold level at 20:20 before the actual RSI turns at 20:40. That the
CHMMs signal occurs two bars earlier, and just in time for the big move, is evidence that
the CHMMs RSI has that predictive power that the standard indicator lacks.
STATE SWITCHES AND RSI VALUES
9400
9380
9360
9340
9320
9300
9280
9260
80
70
60
50
40
30
20
10
100
80
60
40
20
0
4
3
2
1
2:10:00 AM
7/2/2013
3:30:00 PM
7/2/2013
4:50:00 AM
8/2/2013
6:10:00 PM
8/2/2013
CHMMs prediction of a high
probability going into super
bull market is correct.
CHMMs RSI leads
actual RSI.
CHMMs state
USD/CHF
Probability of
likeliest state
CHMMs RSI Actual RSI
(see State switches and RSI values, left).
The measure of success of our CHMM
strategy is based on whether it is more prof-
itable when trading based on the CHMMs
forecasted RSI values than on actual RSI
values. Such a comparison will be made.
With the interest of investigating the
robustness in the CHMM model accu-
rately forecasting values, we will use the
model to trade on another setup, one that
uses the Commodity Channel Index (CCI)
indicator. For space reasons, we wont go
into the details of the CCI strategy, but
it has been optimized over a test period
to perform well using actual CCI values.
The goal then is for the CHMM model to
register an improvement in profits when
trading the same already profitable strat-
egy, but using its forecasted CCI values.
We compare the performances of
the standard RSI and CCI systems with
those enhanced by the four variants of
the CHMMnamely predictions made
by a Viterbi algorithm and a non-Viterbi
algorithm, each using fixed or dynamic
sizing. The test period is 10-minute price
bars over the first four months of 2013.
(Viterbi and non-Viterbi algorithms are
basically two different ways to get the next
most probable state.)
Trading based on the CHMM fore-
casted RSI and CCI values performed
better than the standard systems. The
performance difference is pronounced
for the RSI setup where implementing the
CHMM turned a losing system of 4.55%
to 5.51% returns for Viterbi with fixed
sizing. The CHMMs performances trace
standards fairly closely in the first month,
after which they start to make gains while
the standard RSI starts to record losses
(see CHMM RSI system, right). The
Sharpe Ratio has improved to between
+1.670 to +1.923 among all four variants.
Running our comparison for the CCI
setup, we see that returns improved across
all four CHMM variants. The CCI stan-
dard pulled in a return of 0.35%. The
returns for CHMMs are 0.36% to 0.49%
(see CHMM CCI system, right). Further,
comparing the Sharpe Ratio between
fixed sizing and dynamic sizing across
CHMM variants, we see an improvement
of about +0.2 for the RSI and +0.03 for
the CCI. This hints to us that theres even
value in the models confidence in the
prediction of the next state.
Having witnessed the CHMMs ability
to generate a profitable trading strategy
by coupling the USD/CHF with gold, we
are left to wonder what other assets the
CHMM can couple to make money.
If we stick to the general rule that the
coupled assets either need to be strongly
correlated or uncorrelated, the CHMM
should preserve its profitability. The
theory behind the CHMM and HMM is
robust enough to decode the relation-
ship between two assets and also deduce
how the transition probabilities in either
market affect the other. Be it equities in
the same sector, rates and indexes, cross
yen currencies, currencies and commodi-
ties, bonds and economic indexes, or even
macro and micro price movements, there
are a number of possibilities. It boils
down to choosing the assets and defin-
ing the observations.
Can the CHMM combine three assets
together? Of course it can. But just as it
takes two to tango but three is a tangle,
combining three assets becomes a mess-
ier mathematical sight.
Donny Lee is a quantitative developer at
a hedge fund trading forex in Singapore.
He currently is refining trading strategies
largely centered on Markov models. You
can download the technical and supplemen-
tary code, as well as data sets, from www.
financeberry.com/chmm.html. Reach Donny
at quantdonny@yahoo.com.
Given an already profitable CCI trading system, the CHMM is able to make it slightly
more profitable.
CHMM CCI SYSTEM
80000
60000
40000
20000
0
-20000
1/1/2013 21/1/2013 10/2/2013 2/3/2013 22/3/2013 11/4/2013 1/5/2013
Performance of various CCI systems
C
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Standard
Viterbi
NonViterbi
Viterbi w/Dynamic
NonViterbi w/Dynamic
futuresmag.com 33
Using the CHMM to predict RSI values, we have turned a losing strategy into a win-
ning one.
CHMM RSI SYSTEM
60000
40000
20000
0
-20000
-40000
-60000
1/1/2013 21/1/2013 10/2/2013 2/3/2013 22/3/2013 11/4/2013 1/5/2013
Performance of various RSI systems
C
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Standard
Viterbi
NonViterbi
Viterbi w/Dynamic
NonViterbi w/Dynamic
H
ad it not been for the valuable
secret W.D. Gann pledged to
have clothed in veiled language
in his book, The Tunnel Thru the Air, it
could have passed for just another roaring
20s science-fiction novel. However, stu-
dents have pored over the words, hoping
to unlock the philosophy behind Ganns
techniques. Are they on a path to enlight-
enment or merely chasing a white rabbit
into Alices Wonderland?
Robert Gordon, Ganns fictional per-
sona in The Tunnel, predicts the com-
ing of World War II, which he believes
will be fought in the air. Gann was a par-
ticularly religious person, and he based
this belief on predictions attributed to
the prophets Daniel and Ezekiel. The
Tunnel is replete with biblical citations
pertaining to astrological time cycles
that Gordon uses to predict the future,
including future commodity prices.
In Gordons world, this works, and
as a professional futures and commodi-
ties trader, he follows these time cycles
to generate a fortune from trading cot-
ton. The rest of the plot covers Gordons
plans to use his trading proceeds to build
an invisible airship and air tunnel to
ensure America wins the war. The air-
ship is to keep the movements of the
American army out of the enemys sight,
while the air tunnel is to trap and disable
the enemys aircraft. The blueprints for
the designs are based on a biblical com-
mand to the prophet Ezekiel to build a
chariot drawn by four creatures; beside
each is a wheel within a wheel with tall
and awesome rims.
Gann writes that he considers the Bible
a scientific text on some level, and he sug-
gests that his book borrows biblical con-
cepts that will demonstrate the process
by which man may know all there is to
know, including the stock market. At
the same time, he reveals that his mar-
ket predictions are based on geometry
and mathematics, just as an astronomer
does, based on immutable laws and reit-
erates that his calculations are based on
the cycle theory and on mathematical
sequences. Its important to note, how-
ever, that scientific explanations of these
sequences do not appear in the book.
What the book does include, how-
ever, is Gordons meticulously dated
and priced trading log. The log spans
pages 103-172, and is the only example
of Ganns trading activity in the book.
Given that these pages contain numeri-
cal data, it is where the secret to Ganns
elusive time factor should be found.
Lessons learned
However, The Tunnel is light on trad-
ing details. Surprisingly, Gann makes no
reference to the Square-of-9, geometric
angles or charts, and even omits Dec. 1,
1926, the date cotton prices bottomed,
from Gordons trading log. While he
laces the book with numerous referenc-
es to wheels within wheels, possibly a
loose allusion to the clothed in veiled
language spiral of the Square-of-9, he
discusses none of the tools required for
cracking this books secret.
Without an application of the Square,
its angles and the eras cotton chart, it is
impossible to analyze Gordons trades. It
appears that a great deal of the material
Gann said is in the book is missing. He
does send this signal on page 78, where,
in capital font, he boldly tells the reader
that it is not my aim to explain the cause
of cycles. He then adds, rather patron-
izingly, that the general public is not
W.D. Gann is well-known among trading gurus. However, we know little about the
thought process behind his approach. Some believe Ganns 1920s science-fiction
novel, The Tunnel Thru the Air, contains the hints we seek.
Unlocking W.D. Ganns
The Tunnel Thru the Air
BY PAULI NE NOVAK- REI CH
TRADING TECHNIQUES
I N S I D E G A N N
Unlocking a trading masters secrets
Breaking Ganns analytical code
Chasing meaning in Ganns work
For more from Pauline, go to
futuresmag.com/Novak-Reich
yet ready for it and probably would not
understand or believe it if I explained it.
To put the puzzle together, we must refer
to Ganns Master Commodities Course, as
well as plot a chart of Gordons trades.
On page 331 of t he Mast er
Commodities Course, Gann vaguely
refers to the Square, saying: It is impor-
tant because nine digits are used for
measuring everything. If we divide 360
degrees by nine, we get 40, which mea-
sures 40 degrees, 40 days, 40 weeks and
40 months, and shows why bottoms
often come out on angles measuring one-
ninth of the circle.
In Chapters 5A and 5B of the course,
Gann elaborates upon the strength of
the 180- and 360-degree angles, saying:
the 360-degree angle is strong because it
ends the circle and returns to the begin-
ning degree, and because it is opposite
the 180-degree the angle that equals
half of the circle. As summer becomes
hot and winter reaches frigid temperature
extremes, 182 days later, so too does stock
market action reach volatile extremes.
This is as far as Gann had ever gone to
show the connection between the Square-
of-9 and its 180- and 360-degree angles.
He had most certainly extrapolated from
stories in the Bible that the seven years of
famine followed by another seven years of
plenty, and the 40 nights and 40 days of
the Great Flood, indicate a 360-degree rev-
olution of time. Eager to find a calendar-
calculator capable of measuring time, and
track the angular positions of spans, Gann
turned to astrology where he discovered
the zodiacs cosmic clock his Squares
prototype. It was humanitys first instru-
ment designed to track the movements
of the sun, moon and the arrangement
of planets that ancient civilizations used
for maritime navigation at night and in
projecting a rivers ebb and flow. Ganns
version of the zodiac navigates the ups and
downs of markets.
Albert Einstein once said that had
the laws of the universe been complex,
he would have had no interest in them.
Given that the major divisions of time,
including the orbits of the inner and
outer planets (Earth and its moon,
Mercury, Venus, Mars, Saturn, Neptune,
Jupiter and Uranus) are encoded onto
the Squares cardinals and diagonals
(see Time divisions, above), intricate
astrology masks the simplicity of its use
and is, in fact, irrelevant to trading. If, for
example, a stock advances for 28 days,
and then declines for the same amount
of time, knowing that the western cardi-
nals numeral 28 denotes the length of
one lunar month, does not, in any way,
enhance your trading.
Tr adi ng l og ( above ) and
Diagramming success (page 36) cap-
ture Robert Gordons trading activity
from Dec. 1, 1926, though Oct. 6, 1927.
However, from the amount of data Gann
futuresmag.com 35
The distribution of major divisions of time on the Square-of-9 includes 60 minutes, 24
hours, 1 calendar day (cd), 28 cd of one lunar month, 31 cd of one solar month, 365
cd of one solar year (362), 225 cd of Venus orbit, 91 cd of Mercurys, 690 cd of Mars,
Saturns 10,759 cd, Jupiters 4,332 cd and Uranus 84.02 years (30,689 cd). The sun
at the center of the Milky Way is 1.
TIME DIVISIONS
Neptune 165y(163)
Saturn orbit = 10759cd
Jupiter orbit = 4332cd
24 hours a day
Moon orbit = 28cd
13
31
91
Neptune orbit 165y =
60271cd
61
1
7
U
r
a
n
u
s

o
r
b
i
t

8
4
.
0
2
y

=

3
0
6
8
8
.
3
c
d
E
a
r
t
h

o
r
b
i
t

3
6
2
c
d
V
e
n
u
s

o
r
b
i
t

=

2
2
6
c
d
Mars orbit =
690 (687cd)
W.D. Gann detailed the cotton trades of fictional character Robert Gordon in his book
The Tunnel Thru the Air, ostensibly chronicling a number of trades made and liqui-
dated using Ganns strategies.
TRADING LOG
18
17
16
15
14
13
12
Robert sells at 16.8
Roberts entry price 13.8
Kennelworths entry price 13.7
Maries entry price 13.9
Source: Peter Palaskas
Dec 1927 Feb Mar Apr May Jun Jul
released, it is difficult to establish which
axis of the Square governs cottons
swings. Nonetheless, it can be seen in
Square breakdown (left) that all but
two swings (Aug. 9-13, and Sept. 8-Oct. 6)
terminated at an 180-degree angle. Given
that the Sept. 8 peak, which signaled the
waves end, terminated upon the north-
ern cardinal on day 281 of the run (Dec.
1, 1926, though Sept. 8, 1927), it is likely
that cottons major up and down swings
adhere to the Squares northern axis.
Missing key
It has long been suspected that Robert
Gordons trading log contained the valu-
able secret Gann said he embedded into
The Tunnel Thru the Air. For many
students of Ganns techniques, The
Tunnel is among the first Gann books
theyve read, along with Ganns Master
Commodities Course.
These students, this author included,
would be the first to grant Gann the credit
he deserves for discovering the time fac-
tor the mechanism that governs the
behavior of markets. Gann was one of
Wall Streets supreme giants. However, in
rereading The Tunnel knowing exactly
what to look for and expecting to find
chunks of Ganns secret, its disappointing
to find such details absent, even in code.
However, Ganns time factor, the
Square and simple instructions of its
use, have survived. And in spite of Ganns
conviction that the general public is not
yet ready for it and probably would not
understand or believe it if I explained it,
many of those who once struggled with
Ganns obscure writings, and intricate
astrological charts, have grasped it, and
held on tightly.
Pauline Novak-Reich was the manager of
research-foreign exchange at the Australian
& New Zealand Banking Corp.s dealing room
from 1980 to 1993. Her duties involved anal-
ysis and forecast of currencies, interest rates,
equities and commodity markets trends, as
well as overseeing dealers intraday trad-
ing. In 2005 she authored The Bell Does
Ring (John Wiley, Australia). This article is
based on elements of her upcoming book,
Mystifying Square, Divine Proportions
Natures Black Box. She can be reached at
pauline.reich@optusnet.com.au.
Although Gann isnt specific, we can glean from this table that cottons major swings
adhere to the Squares northern axis.
SQUARE BREAKDOWN
362 361 360 359 358 357 356 355 354 353 352 351 350 349 348 347 346 345 344 343 420
363 290 289 288 287 286 285 284 283 282 281 280 279 278 277 276 275 274 273 342 419
364 291 226 225 224 223 222 221 220 219 218 217 216 215 214 213 212 211 272 341 418
365 292 227 170 169 168 167 166 165 164 163 162 161 160 159 158 157 210 271 340 417
366 293 228 171 122 121 120 119 118 117 116 115 114 113 112 111 156 209 270 339 416
367 294 229 172 123 82 81 80 79 78 77 76 75 74 73 110 155 208 269 338 415
368 295 230 173 124 83 50 49 48 47 46 45 44 43 72 109 154 207 268 337 414
369 296 231 174 125 84 51 26 25 24 23 22 21 42 71 108 153 206 267 336 413
370 297 232 175 126 85 52 27 10 9 8 7 20 41 70 107 152 205 266 335 412
371 298 233 176 127 86 53 28 11 2 1 6 19 40 69 106 151 204 265 334 411
372 299 234 177 128 87 54 29 12 3 4 5 18 39 68 105 150 203 264 333 410
373 300 235 178 129 88 55 30 13 14 15 16 17 38 67 104 149 202 263 332 409
374 301 236 179 130 89 56 31 32 33 34 35 36 37 66 103 148 201 262 331 408
375 302 237 180 131 90 57 58 59 60 61 62 63 64 65 102 147 200 261 330 407
376 303 238 181 132 91 92 92 94 95 96 97 98 99 100 101 146 199 260 329 406
377 304 239 182 133 134 135 136 137 138 139 140 141 142 143 144 145 198 259 328 405
378 305 240 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 258 327 404
379 306 241 242 243 244 245 246 247 248 249 250 251 252 253 254 255 256 257 326 403
380 307 308 309 310 311 312 313 314 315 316 317 318 319 320 321 322 323 324 325 402
This chart shows the price moves between Robert Gordons trades.
DIAGRAMMING SUCCESS
Key:
cd = calendar days
S = Southern cardinal
N = Northern cardinal
NW= Northwestern diagonal
NE = Northeastern diagonal
SW= Southwestern diagonal
SE= Southeastern diagonal
Sep 08 = 26cd NW
Total cd = 281 N
= 180
Aug 09, 1927
Total cd 251cd = S
From Feb 1 = 189
cd = S
Roberts 1st Trade
Feb 01, 1927 = 62cd
from Dec. 01, 26 S
Aug 06
7cd NE
Total 66cd
SE = 180
Dec 01, 1926
Market low
Jun 01, 1927
182cd SW =
180 from
1926 low
Sep 28
= 7cd NE
= 180
Jul 30
35cd S
= 180
Sep 21
13cd
SW
Aug 13
4cd = S
360
Oct 06
8cd N
Jun 25
24cd N
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E
very market has its time, including
stocks. This is the basis of trend
trading. At any given time, some
stock or market sector is appreciating or
declining steadily in price. These trends
embody significant profit opportu-
nity for traders, offering relatively large
rewards with comparatively little risk
with respect to other strategies.
However, the task is not so simple.
Traders must not only find the right
stocks or market sector exchange-traded
funds, but they must execute a disciplined
approach to trading them. Many traders
miss profit opportunities because of fear.
Fear is a mental anchor that feeds a
disbelief that the trend wont continue.
In the mind of the trader, either the stock
has risen or fallen too much. It has left no
more room for predictable price change.
However, most of the time, the trend con-
tinues and opportunity is missed. These
missed trades usually are when a smaller
trend of the larger move breaks.
Trend trading does not have to be com-
plicated. There are a number of tools avail-
able to identify when stocks are making an
extended move. One such approach might
include the following technical conditions
to qualify an uptrend:
The stock is above the 21-, 50- and 200-
day moving average
The stock has started moving up after
a long period of consolidation
The stock is making new highs on the
six-month or 52-week time frame
Consider Time to move (below). The
Indian stock La Opala RGs behavior
depicted here is illustrative of how indi-
vidual equities move no matter the market.
At any given time, a sector or stock can experience a huge trend. Successful
traders must not only identify these moves early on but also have a disciplined
approach to trading them.
Using moving averages
to target the trends
BY RAGHAV BEHANI
EQUITY TRADING TECHNIQUES
S T O C K S
Capturing profits in trends
Anatomy of a directional move
Losing the fear in trend trading
This chart of the Indian stock La Opala RG demonstrates how trends usually develop.
Rather than a consistent, steady climb, there are short bursts in the overall direction
broken up by periods of sideways consolidations.
TIME TO MOVE
Source: ChartNexus
462
448
434
420
406
392
378
364
350
336
322
308
294
280
266
252
238
224
210
196
182
168
154
140
126
112
98
May Jun Jul Aug Sep Oct Nov Dec 2013 Feb Mar Apr May Jun Jul
A long period of consolidation
LA OPALA RG LIMITED (LAOPALA)
Moving average (50d)
Moving average (200d)
EMA (21d)
As we see, it went through a long phase of
consolidation from February 2012 to July
2012, with the major moving averages get-
ting squeezed in that period.
In August, however, the stock started
moving upward. It ultimately appreciat-
ed around 400% in the next year. Clearly,
the larger trend was bullish. As price fol-
lowed this bias, we saw sharp rises fol-
lowed by a small period of consolidation
and then more moves higher.
The blue lines are trendlines that were
drawn from the high point of the candle-
stick that formed as a result of a solid
upmove. The trendlines have been connect-
ed to the tops of a few more candlesticks
that created resistance. Once the resistance
broke, there was a fresh rally higher.
We can see similar movement in
Dominos Pizza Inc. (see Parabolic push,
right). The stock broke out above its 52-week
high and the 21-, 50- and 200-day moving
average on the three-day chart in early 2010.
Since then, it has risen close to 700% in just
three years. Throughout this rise, the stock
offered trading opportunities after phases of
consolidation, and the breakout would see
rallies of 10%-15% with the stock finding
support at the 21-day moving average. The
stock did break the 21- and 50-day moving
average, but later rallied further.
Lumber Liquidators Holdings provides
another classic example of a stock breaking
into a sustained trend (see Run and gun,
right). The stock had consolidated within a
rising channel for the latter half of 2011. In
2012, it broke above the range and started
a rally that had periods of short trends and
consolidations. Once again, the breakouts
from the consolidating patterns gave the
stock a 10%-15% upmove in a short span of
time, usually just three to four days.
The consolidation would then go on
for a month, after which the uptrend
would resume. The stock was creating
higher highs and a future support level.
It gave a break from the $48 resistance in
September 2012, and later on that resis-
tance became a crucial support that twice
gave the stock a bounce from those levels.
Thus, the uptrend continued.
In trend trading of this nature, the best
opportunity for trades comes when there
is a pop followed by a consolidation. The
creation of this temporary resistance
and then the breaking of it provides the
short-term momentum that
allows traders to make solid
returns over short periods.
When the subsequent con-
solidation occurs, fear sets in,
however, and traders find it
hard to believe that the mar-
ket could have another surge
higher (or lower). Its the
culmination of these moves,
though, that results in gains
of 50%, 100% or even 200% in
just a matter of a few months.
Its simple. The uptrend in
the stocks exists as long as they
are above the 21-day and the
50-day moving averages. Still,
price moving below these aver-
ages alone cant be an indica-
tion of trend reversal. A better
and more accurate indicator is
when the 21-day actually cross-
es below the 50-day while price
remains below the averages.
One observation in these
trending stocks is that they
find support and consoli-
date roughly 5% around
the zone where the 21- and
50-day moving averages
start to overlap. This creates
a good base for the stock
that becomes strong sup-
port for the future. Once
the stock breaks out of this
consolidation zone, with
the 21-day above the 50-day,
a new phase develops and
opportunities arise.
In many cases, these moves
are accompanied by what
some consider a counter-trend indicator
an overbought reading in the relative
strength index (RSI). In cases of strong
trend moves, the RSI might remain over-
bought while the stock continues to create
new highs. The chart of the Indian stock
market index, the CNX-FMCG, shows us
an excellent example of this (see Buying
on strength, page 44).
Traders should ask themselves why
stocks tend to trend in this manner,
making new highs repeatedly over time.
Reasons might be:
Fundamentally, the stocks are part of
undervalued sectors
The stocks have consolidated because
of low volumes or little fund interest
Once the relevant fundamentals
change or the government comes out
with some favorable policies these sec-
tors attract money from institutional
investors because of under-valuation and
brighter future prospects. With so much
money flowing in and new buyers being
attracted, the rally is here to stay.
Risk control
A trader who sells a falling stock or buys
a rallying stock has invested in the like-
futuresmag.com 39
This upmove in Dominos Pizza gathered momentum
as it continued, offering even greater short-term gains.
This chart of Lumber Liquidators shows how hard it can
be to capture individual bursts higher in an uptrending
stock. Several of the moves were short, quick surges
providing little warning.
PARABOLIC PUSH
RUN AND GUN
Source: ChartNexus
Source: ChartNexus
60.00
56.00
52.00
48.00
44.00
40.00
36.00
32.00
28.00
24.00
20.00
16.00
12.00
8.00
57.00
54.00
51.00
48.00
45.00
42.00
39.00
36.00
33.00
30.00
27.00
24.00
21.00
18.00
15.00
10 11 12 6/20/2013
Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
59.15
DPZ (Dominos Pizza Inc)
LL (Lumber Liquidators Holdings)
Equity Trading Techniques: Behani continued on page 44
E ME R G I N G MA N A G E R S
M
att Chuang says what separates the
Leapmach Capital Management
Delta Neutral Short-Term Strategy from
the scores of other option writing strategies
is its strong emphasis on risk management.
While that claim is hardly unique,
Leapmach, which Chuang founded in 2011
after working at Getco for seven years, does
many things differently. First, it is diversi-
fied, trading all the major sectors instead
of concentrating on stock indexes. And
Chuang approaches each sector differently,
utilizing both fundamental and technical
analysis in his mostly systematic approach.
Technical and fundamental analy-
ses are equally important to my trading
strategy, Chuang says. Based on the
product traded, I may weigh on one more
than the other. For example, I would pay
more attention to fundamentals in equi-
ty indexes whereas in gold, technical anal-
ysis may be more meaningful.
He evaluates each market and sector
separately based on volume and volatility.
[Because] risk management is my utmost
priority, I like to be as diversified as possi-
ble, Chuang says, I use a variation of one
core strategy on each sector because they
all have different intrinsic characteristics.
Trading multiple markets offers me more
[seats] at the table, so if one or a few mar-
kets volume and volatility dry up, I could
still be active in other markets.
Although the strategy is based on pre-
mium collection, he takes both long and
short options positions; and while his
long options are usually a hedge, there
are times they also may drive returns. I
am long options mostly for hedging pur-
poses, he says. I understand by entering
[spreads], there is a trade-off in returns,
but I reduce certain market risks. My long-
to-short position ratios vary from time-to-
time and product-to-product depending
on current and prospective market condi-
tions. Only at the times when the markets
become extremely volatile and directional
[do] long options generate profits.
Chuang earned a masters degree in elec-
trical engineering from the University of
Illinois, but a roommate involved in trad-
D
t
is
L
a
m
The past couple of years have been rough on experienced traders, not to mention
emerging managers. In our annual review of new talent, here are three managers
who successfully have ridden out the post-2008 aftershocks still affecting the
business and markets.
MANAGED MONEY
Hot new CTAs move beyond
rough couple of years
BY DANI EL P. COLLI NS
Leapmach Capital: Taking care of risk
T
his is the 24th year Futures has profiled emerging com-
modity trading advisors (CTAs), and while every year is
unique, in 2013 agriculture-focused and niche manag-
ers have done well. It is no surprise because it has been another
difficult year for long-term trend following. Ag-based man-
agers tend to be more fundamental and discretionary, which
has allowed them to avoid the difficulty of the risk-on/risk-off
nature of markets in recent years.
It also makes sense for emerging managers to try to dis-
tinguish themselves because even in a good trending envi-
ronment, it is difficult for emerging trend-followers to be
recognized. Its good to be unique.
It is always a tough road to launch a new trading business,
and this year once again has been difficult because of the fallout
of MF Global and Peregrine Financial Group and the resulting
additional regulatory burdens.
When reviewing candidates, we look not only at recent per-
formance, but also the managers general approach to trading,
risk management, consistency in style and fee structure.
Previous Hot New CTAs have gone on to great success and
some have slipped into obscurity. This is not an endorsement,
but a review of new talent.
futuresmag.com 41
For more on managed funds, go to
futuresmag.com/managed funds
ing helped him change his career
path. After graduating in 2005,
his roommate advised him to go
into trading, so he turned down a
more lucrative position and took
a job with, at the time, a start-up
proprietary trading firm.
I tried trading for a while
and never went back [to engi-
neering], Chuang says.
Most positions are initiated
with spreads based on where
Chuang expects a market to move
over a specific period of time. For
every trade I make, I always make
sure within a certain time period I expect the
market to move within a certain price range,
and that is how I initiate a trade, Chuang
says. Before I make any trade, I make sure
the time window I am looking at is good for
my client and then I decide [where] the price
range for the underlying futures contract
will move in that time period.
Leapmach maintains offices in Chicago
and Hong Kong. Chuang splits his time
between Chicago and Asia where he has
other business interests. He was raised in
Taiwan before moving with his family to
Canada and then to Chicago after college.
His strong emphasis on risk
management has been tested
through some volatile markets.
Leapmach has produced a com-
pound annual return of 15.29%
since its January 2011 launch
with a worst drawdown of 1.02%.
Leapmachs trades can last
from a few days to several
months, and Chuang is con-
stantly monitoring and adjusting
them. We all know options writ-
ers worst nightmares are extreme
directional price movements,
Chuang says. Having the ability
to monitor margins and risks real-time has
prevented me from suffering huge losses in
these adverse events.
In that respect, Chuang has managed
to take the worst fears of options writing
and profit from them.I believe that there
are more money making opportunities
when markets are in a berserk mode, so
there is nothing wrong [with hitting] the
reset button even if that means losing
money and start[ing] fresh.
T
ypically, commodity trad-
ing advisors either are
diversified or stick to one mar-
ket or market sector, but LEH
Advisor LLC has a different
approach trading one market
in four major market sectors.
That is not all that is unique
with Larry Hirshiks short- to
medium-term strategy.
Hirshik traded for various
large institutions for two
decades before going out on
his own. He developed his
Breakout Point strategy, which
trades 30-year U.S. Treasury bonds, the
euro currency, e-Mini Nasdaq 100 and
silver, in 2009.
I picked those markets because they
are markets that trend well, Hirshik says.
His selectivity may be a bonus as the
few managers who fall into the medium-
to-long-term trend-following camp that
have been successful the last few years
have done so by concentrating on a few
markets and avoiding the chop of the
risk-on/risk-off trading environment.
The Breakout Point strategy is short-
to-medium-term and utilizes countertrend
as well as trending elements as
part of a technical approach.
Hirshik uses basic technical
tools: MACD, Stochastics and
SAR. But he does not apply
them to the four markets he
trades; instead, he applies them
to two exchange-traded funds
related to each of those mar-
kets. For example, for silver he
will apply his technical models
to the GLD and SLV ETF and
come up with a signal.
We run indicators on ETFs
and those ETFs say buy, sell
or do nothing, and then we take those
trades in the futures markets, Hirshik
says. I dont run any technical indicators
on futures. The futures is what I take the
positions in; the ETFs tell me whether to
take the position.
Hi r s hi k be ga n t r a di ng f or
Manufacturers Hanover Bank after grad-
uating from UCLA with an MBA in 1983.
He would go on to trade for numerous
bank desks managing bond portfolios.
LEAPMACH CAPITAL MGMT (DNST)
Source: Barclay Hedge
J
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1600
1400
1200
1000
800
600
400
200
0
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
-0.5%
-1.0%
-1.5%
ROR
VAMI
Leapmach Capital Mgmt.
Total money under management: $1.1 million
August return: .70%
YTD: 6.39%
Worst drawdown: 1.02%
Sharpe ratio: 5.19
LEH ADVISOR LLC
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J
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0
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p
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1
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v
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1
J
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M
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M
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J
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M
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J
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3
3000
2500
2000
1500
1000
500
0
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
ROR
VAMI
LEH Advisor: Selective diversification
LEH Advisor (Breakout Point)
Total money under management.: $2.0 million
August return: 4.58%
YTD: 30.51%
Sharpe ratio: 1.40
MANAGED FUNDS continued
I was a manager on the trading desk
so I was running these interest rate deriv-
atives books; there was a lot of yield curve
analysis and a lot of quantitative work,
he says. Once he went out on his own,
he developed a quantitative approach to
trade credit default swaps. But as the mar-
ket grew more difficult, he shut the fund
down, luckily before the huge volatility
spikes in CDS leading to the credit crisis.
We closed down CDS hedge fund in
2006. We were fortunate because it would
have been messyspreads between corpo-
rate bonds and CDS became huge. The
spread blew out, he says.
Working on order desks of large insti-
tutions helped in developing his cur-
rent strategy. [I] learned to be humble,
learned to respect the market and learned
how firm the market can be compared to
your conviction, Hirshik says.
It taught him the risk of overleveraging
and gave him an appreciation of the safe-
ty of listed regulated markets. You are at
the whim of the people you have credit
agreements with, and that is one of the
pitfalls of the OTC market.
His strategy, which has produced a
compound annual return of 24.62% and
is up 30.51% though August, only trades
one contract in each market for every
$100,000 invested, except for silver which
trades one contract per $200,000.
Volume also plays a role in his signal.
We compare a moving average of volume
with the current volume and if the cur-
rent volume beats the moving average by
a certain amount, it adds to the weight
[of the signal], he says.
R
edleaf Capital, LLC has
been a registered CTA for
just over a year, but founder
and President H. Rogers Varner
Jr. and his family have spent gen-
erations in trading, mainly agri-
culture, and especially in cotton.
My background is in cot-
ton, Varner says. We were a
cotton family for generations.
My dad was a merchant, my
grandfather grew it and my
great grandfathers grew it and
fought Yankees over it. Our
thing has always been cotton
and I still gravitate toward it.
Varner, based in Cleveland, Miss.,
launched an introducing brokerage
business in 1987 with a focus on help-
ing farmers, particularly cotton farmers,
hedge their crop.
The first thing [to do] is to protect
your customers equity and at the same
time try and expose [them] to risk and, to
that end, I try and recognize two or three
good trades a year and then try and get
on the horse without getting bucked off,
Varner says.
Varner earned a masters degree in
engineering from Tulane University in
New Orleans, and worked as an engineer
for eight years before getting involved in
trading. Despite that background, today
he focuses on the fundamentals.
When I got into this business I was
used to the mathematics, so I gravitat-
ed toward analysis, and I learned to do
some fundamental analysis from John
Bondurant (see December 2004 Trader
Profile), Varner says.
Basically he selects a direction based
on the fundamentals and uses technical
analysis for timing of entries and exits.
You have to have a fundamental bias to
a market, he says. If you dont have that
fundamental bias to the market, you are
just going to blow with the wind and a lot
of times these systems get chopped up in
sideways markets.
One of the key fundamental factors
for Varner is to determine production
costs. It goes to his familys history in the
cotton business and working with pro-
ducers. Once you have that, you have an
idea with regard to supply as to whether
or not the people in the world
who mine it, farm it or produce
it have an incentive or disincen-
tive [to do so].
From there he looks at the
demand side.
Varner has spent his career
working with small farmers, so
when he launched his CTA he
kept the minimum investment
levels low so his hedging custom-
ers could participate. He utilizes
mini contracts so customers can
invest with him for as little as
$25,000. His Fallback fundamen-
tal program, which launched January 2011,
is up 29.01% through August and he has a
compound annual return of 43.97%.
He trades a diversified group of com-
modity markets even some financials
but he concentrates on ags with a 25%
allocation to grains and a 25% allocation
to softs (mostly cotton).
Varner uses options in his strategy
because of his long-term outlook. A lot
of times with fundamental analysis you
can be too early, he says. With options
you do not have to be as precise on the
timing of a move to profit from it. [The]
first thing I do is buy options, and then I
do some more work and see if the idea is
worth going into futures, but [first]I go
ahead and get something done in options
and have some exposure to it, Varner
says. Some of these big moves take a year
or two. I am not a day trader hopefully
when I put a position on, it is good for
a year to 18 months, and then I learn to
protect and trade around it.
Redleaf: Generations in the making
REDLEAF CAPITAL, LLC
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3000
2500
2000
1500
1000
500
0
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
-10.0%
-20.0%
ROR
VAMI
Redleaf Capital
Total money under management: $1.3 million
August return (Fallback <$50,000): -1.70
YTD: 29.01%
Sharpe ratio: 1.27
Here is how it works. If trading a harvest
low in corn, you would begin looking at
put options in October for the corn mar-
ket. How close or far away your strike is
from the actual price of corn is dependent
on your risk tolerance. The object is to pick
a price level that corn will not reach and
sell a put option at that strike price for a
specified premium. If the option expires
with the value of corn anywhere above that
strike price, your option expires worthless
and you keep the premium as your profit.
The downside to this strategy is that
if youre wrong and corn prices tank,
the value of your option will increase.
You might have to buy it back at a loss,
depending on how much you are willing
to lose. Decide how much you are willing
to risk prior to entering the trade. If the
option increases to that value, buy it back.
The upside is that you do not have to
pick the low in corn to be profitable. You
can be way off in your pricing or timing and
still make money on your trade. If you sell a
put option 50 cents below the market, corn
can keep falling and you can still hold your
option. All corn has to do is be anywhere
above your strike at expiration and you win.
The high odds and forgiving nature of short
options is what attracts many sophisticated
investors to the strategy, as long as they are
comfortable managing their own risk.
The USDA projects average on-farm
corn prices to be from $4.40 to $5.20 for
the 2013-14 crop. As a trader, looking to
sell puts on the March contract below
that range seems to be a high-odds prop-
osition. Sell further away if you seek less
risk, closer if you seek higher premium.
Experience shows that premiums in the
$400-$500 range work well for corn. You
likely will have to go out to the March con-
tract to get them. Thats OK. As an option
seller, time is always on your side.
Michael Gross is co-author of McGraw Hills
The Complete Guide to Option Selling.
Email him at mgrossconsulting@aol.com.
This chart offers an average of corn prices over the last 15 years. The pattern indicates
that prices tend to bottom in early October.
SEASONAL TRENDS
Source: Moore Research Center Inc.
100
75
50
25
0
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
March corn (CBOT)
15-year seasonal (1999-2013)
Gross continued from page 27
futuresmag.com 43
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lihood that the trend will continue. A
trader who buys a falling stock or sells
a rallying stock has bet on a reversal in
the larger trend. Of course, reversals hap-
pen, but over time the safer bet is to go
with the trend rather than assume the
moment you make your trade is one of
those rare moments when price turns.
Down and out (above) shows the
market price of Indian steel giant Jindal
Steel. This stock has been in a bearish
trend from the beginning of 2013, with
some pullbacks seen in between. The
stock hasnt managed to close above the
21-day moving average, and every time it
comes near it, selling pressure is seen and
the stock drifts lower.
Jindal saw a sharp sell off in June and
then later consolidated for a greater part
of July. Resistance formed and provided
some trading opportunities. A trader
going with the larger trend would have
shorted it around 230 and waited for
the stock to fall, but a trader who bet
on a trend reversal would have bought
it and waited for 230 to break. This is a
key price, both in terms of resistance and
moving average vicinity.
If the trend on a larger time frame is
bearish, then trades should be taken with a
bearish view around the resistance levels. If
the trend is bullish, then the trades should
be taken with a bullish view once the resis-
tance on a smaller time frame breaks.
When a trade is taken on a breakout
basis and the price is above the 21-day
moving average, positions should be held
until the price breaks the average. In most
cases, these positions are held for one to
two months. Traders should maintain a
stop loss shortly below the moving aver-
age, but if the risk involved is greater than
7%, consider a dollar-based stop instead
one that better fits a more conserva-
tive risk appetite. Short-term traders can
use a stop loss of a close below the candle
that provides the breakout confirmation.
Trend trading is an important tool for
all stock traders to have in their arsenal.
The benefits are that trending stocks
move in one direction steadily; there is
little confusion over the direction of price.
When timed correctly, profits come quick-
ly. Generally, trend moves are supported
by strong fundamental underpinnnigs.
Of course, this approach isnt perfect or
foolproof. Downsides of this strategy are
that its tough to decide on proper profit
targets and stop losses. As quickly as prof-
its appear, they also can disappear. Plus,
breakout trend moves can be missed easi-
ly, particularly by traders paralyzed by fear.
Once gone, it may be some time before a
trend opportunity re-presents itself.
Raghav Behani is a trader and investor in the
Indian stock markets. Reach him via his web-
site www.dalalstreetbulls.com.
EQUITY TRADING TECHNIQUES continued
Despite overbought readings in the RSI, this Indian stock index continued to trend
higher. This is a typical scenario during long trends.
BUYING ON STRENGTH
Source: ChartNexus
18720
18408
18096
17784
17472
17160
16848
16536
16224
15912
15600
15288
14976
14664
14352
14040
13728
13416
13104
12792
12480
70%
30%
1
1
1
1
1
0
0
0
0
0
Aug Sep Oct Nov Dec 2013 Feb Mar Apr May Jun Jul
CNX FMCG
Moving Average (50d)
EMA (21d)
Jindal Steel is in a sustained downtrend. Recent consolidation around 230 could be
construed as bottoming behavior, but the safer trade might be to go with the larger trend.
DOWN AND OUT
450
440
430
420
410
400
390
380
370
360
350
340
330
320
310
300
290
280
270
260
250
240
230
220
210
200
JINDAL STEEL & POWER LTD (JINDALSTEL)
EMA (21d)
Source: ChartNexus
28 4 11 18 25 4 11 18 25 6 13 20 27 3 10 17 24 1 8 15 22 29 1 8 15 22
Feb Mar Apr May Jun Jul
Behani continued from page 39
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B
ob Otter and Chad Burlet became friends when Burlet
directed the cash/futures convergence trade for Cargill
and Otter executed Cargills soybean trades on the floor
of the Chicago Board of Trade (CBOT). More than 30 years
later, with many stops along the way, that friendship turned
into a partnership leading to the creation of Third Street Ag, a
commodity trading advisor (CTA), in 2012.
Fundamental, discretionary, agricultural; those three terms
capture it pretty well, says Burlet, who grew up in Minnesota
and began working for Cargill immediately after college. He had
numerous positions over nine years for Cargill, ending up as the
head of oilseeds trading. From there he went to Goldman Sachs
in New York where he helped establish its grain trading business.
After 16 years of proprietary trading for large institutions
Burlet decided to trade for himself and moved to Chicago in 1996.
Otter says his story is pure Chicago. He got a job on the CBOT
as a runner and became an early employee of brokerage start-up
Iowa Grain in the 1970s. He would move up the ladder for Iowa,
becoming general manager, while also purchasing a member-
ship and starting a trading career.
Their friendship was part of why Burlet moved to Chicago
and is the genesis of their name as they both live on Third Street
in the same Chicago suburb.
In 2008 Burlet began trading for a large customer which is
part of the track record of Third Street until the summer of 2012
utilizing his decades of fundamental knowledge of the grain sector.
Since teaming up in August 2012, reducing leverage and apply-
ing more vigorous risk management procedures, the program
has returned 14.5% with a worst drawdown of 2.05%.
Burlet trades relationships in the grain sector by analyzing thou-
sands of fundamental inputs. One of the important things to ask
every day is what are the most important fundamentals at any given
time. What is currently driving the market? Burlet says. There are
thousands of things that we are monitoring on a regular basis.
Burlets performance in this period was strong but also volatile
leading to a 53.53% drawdown in 2010. He dropped 28.41% that
year but followed it up with a strong 2011, earning 44.58%.
The two had broached the subject of teaming up before but
in 2012, with Bob leaving the floor, the timing seemed right. So
they decided to launch a CTA based on Chads trading and Bobs
risk management expertise.
The market analysis has not changed, our trading philoso-
phy has not changed, what has changed is our risk management
and our risk appetite, Burlet says. If our risk management
guidelines had been in existence, 2010 would have been a very
profitable year. Things that Bob and I have implemented as
partners, with Bob being the chief risk officer, would have taken
what ended poorly in 2010 and left us highly profitable.
The program trades the grain complex and soybean products.
At times the strength or weakness in the cash grain market
might be a dominant feature, at other times cash markets are
more neutral so we watch global production, global consump-
tion, trade flows, weather and everything that has to do with
both the supply side and the demand side, Burlet says. What
are animals eating? Which importing countries are buying and
what are they buying? Is it wheat? What class of wheat?
Most of their trades are spreads but theirs is not a spread pro-
gram per se. They trade spreads, outrights and options. Otter
says it is based simply on selecting the right tool.
If we think there is an opportunity in the futures market, then
how best to trade it, explains Burlet. Very often for us it is a
spread, [like] a calendar spread within corn or soybeans; it might
be an inter-commodity spread, corn against wheat, soybeans
against corn or it might be an inter-exchange spread, Kansas City
[wheat] against Chicago, Minneapolis against Kansas City. Those
are some of the tools [we use]once we identify an opportunity
through our constant monitoring of the fundamentals.
He adds, What we are watching for is price dislocations.
Price relationships that are unsustainable over time. When we
see those situations occur, theyre going to resolve themselves
through a combination of price and time.
Third Street has a global perspective. They ask, how does the
trade fit into the world economy? China is the easiest example
because they import 70% of all the soybeans shipped in the world,
Otter says. Having an awareness of what is going on in the con-
suming economies is important, and also awareness of what is
going on in the various currency markets, especially the South
American currencies, because the world soybean trade is priced in
dollars. When their currencies change in value, it affects the market-
ing patterns of producers in South America.
Third Street Ag: Fundamentally sound
BY DANI EL P. COLLI NS
TRADER PROFILE
P
H
O
T
O

B
Y

S
C
O
T
T

B
E
L
L
CHAD BURLET AND BOB OTTER
DIGITAL EXCLUSIVE
O
ptions pricing models include
two that are online as free Excel
worksheet programs at www.
futuresmag.com: The Black-Scholes
model and LLP (log-log parabola) model.
Black-Scholes and similar models were
critical to the development of trading
at facilities such as the Chicago Board
Options Exchange (CBOE) in 1973. As
theoretical pricing programs that may
be computerized for instant delivery,
options pricing models were the neces-
sary foundation that enabled options
trading to grow from a dozen or so OTC
puts and calls advertised by brokers in
financial newspapers pre-1973 to the
thousands listed for trading at present.
The LLP model, first described in
Futures magazine in February 1985, uses
market prices for options on commod-
ity futures and equities that basically are
valued according to Black-Scholes. The
models are not competitive because the
LLP program depends on Black-Scholes,
expanding its usefulness in several direc-
tions including predictive pricing for-
mulas and indications of over- or under-
valuation of options market prices.
Calls on March 2014 softs (above)
shows the LLP model in action. The chart
includes calls on five March 2014 softs
futures contracts on June 3, 2013, cover-
ing futures prices-to-strike price ratios
ranging from 0.70 to 1.00.
The height of each options price curve
indicates the relative implied volatility
attributed by the market to the under-
lying. For example, calls on coffee and
orange juice futures have the highest
expected volatility, while cotton and
sugar futures are the lowest, and cocoa
has midrange implied volatility accord-
ing to curve heights.
Softs futures (right) shows the
cumulative price changes for the five
March 2014 contracts over the period
March 1 to June 3, 2013. It illustrates
how call options are priced according to
time to expiration and volatility with no
directional forecast. For the two higher
priced calls coffee and orange juice
expected volatilities relate to one that has
Options pricing models are one of tradings most important tools. We examine the
performance of two popular models in the modern softs market.
Pricing softs with option models
BY PAUL D. CRETI EN
TRADING TECHNIQUES
S O F T S
How pricing models work
Exploring their options
Comparing models in the softs market
For more from Paul, go to
futuresmag.com/Cretien
Options pricing models are used to estimate volatility. Here, we can see that the market
considers coffee and orange juice more volatile than, say, sugar.
CALLS ON MARCH 2014 SOFTS
0.09
0.08
0.07
0.06
0.05
0.04
0.03
0.02
0.01
0.00
0.70 0.75 0.80 0.85 0.90 0.95 1.00
C
a
l
l

p
r
i
c
e
/
S
t
r
i
k
e

p
r
i
c
e
Futures price/Strike price
Cotton Orange juice Coffee Cocoa Sugar
DIGITAL EXCLUSIVE
increased by 20% in price while the other
has declined by 10%. The lowest options
value for cotton futures is supported by a
cumulative price change of approximate-
ly zero over the three-month period with
little up-or-down price variability.
Predicting prices
The Black-Scholes options pricing
model typically is used to find the
implied volatility of an underlying by a
trial-and-error process.
While the other pricing details are
known or estimated time to expiration,
risk-free rate of interest and the ratio of
futures price to strike price the stan-
dard deviation of underlying price move-
ment is unknown. For example, on June
3, 2013, the July 2014 orange juice futures
were priced at 148.35. Time to expiration
(382 days) equaled 1.06 years, and a risk-
free rate of 0.20% was estimated. Using a
strike price of 150, the standard deviation
of 0.2474 was computed by the process
of successive changes until the estimat-
ed call price, 14.4499, approximated the
calls actual market price of 14.450.
When the Black-Scholes model is used
to estimate implied volatilities for equi-
ties, expected dividends are part of the
underlying known values. With futures
calculations, the dividend is zero. The
model tends to undervalue the put at the
same strike price, compared to its mar-
ket price. For the July 2014 orange juice
example, at the 150 strike, the puts esti-
mated price was 15.78 versus the actual
market price of 16.10.
That puts are undervalued only slight-
ly is used in one example to indicate a
profitable spread trade using puts at dif-
ferent strike prices. On June 3, 2013, the
March 2014 cotton futures were priced at
84.25. With 249 days to expiration (0.69
years), 0.20% risk-free interest rate and
a strike price equal to 85, the calls mar-
ket price of 4.84 was matched by using
the standard deviation of the underly-
ing equal to 0.1838. At the same time,
the expected put price was 5.4728 vs. a
market price of 7.460. The difference of
1.9872 option price points, or $993.60,
seemed excessive.
To check the difference between expect-
ed and market prices for the put on March
2014 cotton No. 2, the Black-Scholes
model was used on the July 2014 futures
and options. This showed the expected
put price to be 6.3438 vs. a market price
of 6.520 the usual slight undervaluation
by the pricing model, with a reasonable
market value for the put.
The pricing analysis based on the
Black-Scholes model suggested selling
the March 85 put on June 3 while buy-
ing the July 85 put to protect against
adverse price movements in the under-
lying. Closing out the trade on June 7
resulted in a net gain of $770, summa-
rized as follows:
June 3:
Sell March 85 put at 7.460 for $3,730
Buy July 85 put at 6.520 for $3,260
June 7:
Buy March 85 put at 5.990 for $2,995
Sell July 85 put at 6.590 for $3,295
The net gain before transaction costs
included $735 on the March 85 put and
$35 on the July 85 strike. As price protec-
tion, the July 85 put could have moved in
either direction based on a change in the
underlying price of cotton futures. This
example shows that the Black-Scholes
model has predictive pricing uses in addi-
tion to estimating implied volatility.
Model differences
Volatilities derived from calculations on
the options market are expected to be
futuresmag.com 49
Options pricing models are independent of price direction. Their inputs are known as
of the time of the calculation.
SOFTS FUTURES
30.0%
20.0%
10.0%
0.0%
-10.0%
-20.0%
M
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r
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4
M
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7
M
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1
2
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1
5
M
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2
0
M
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2
5
M
a
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2
8
A
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3
A
p
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8
A
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1
1
A
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1
6
A
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1
9
A
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2
4
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2
9
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y

2
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7
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1
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1
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a
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2
0
M
a
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2
3
M
a
y

2
9
J
u
n
e
3
Cumulative percentage price changes
Orange Juice Coffee Sugar Cotton Cocoa
Here is how the different volatility measures of the LLP and Black-Scholes models
compare.
VOLATILITY COMPARISON
LLP% Black-Scholes SD
Coffee March 14 10.23 0.2798
July 14 11.18 0.2570
Orange juice March 14 9.08 0.2591
July 14 10.49 0.2474
Cocoa March 14 7.77 0.2290
July 14 9.38 0.2298
Cotton No. 2 March 14 6.23 0.1838
July 14 7.98 0.1933
Sugar No. 11 March 14 6.75 0.1783
July 14 6.98 0.1708
Trading Techniques: Cretien continued on page 51
Chronicles of a Million Dollar
Trader: My Road, Valleys, and
Peaks to Final Trading Victory
By Don Miller
John Wiley & Sons, Inc.
$40.00, 270 pages
BY PATRI CK KELLY
This book, written by Don Miller, an
independent fund trader, chronicles day
by day the authors successful attempt
to grow his self-directed retirement fund
by $1 million in a single year through
intraday futures trading,
ultimately earning him
$2 million in 18 months.
Millers journal covers the
period 2008 to the end of
2011 and peers into the
realm of an equity index
futures trader, tracking
the ups and down, wins
and losses, mistakes and
bold decisions that are
integral to trading these
financial instruments.
Each calendar day entry
contains a trading time-
line, a graph of an index
such as the DAX, Globex or the E-Mini
S&P 500 futures contract, and concludes
with a current-day note on gains or losses.
Before he started his online trading
journal in 2008, Miller had, by his own
admission, underperformed as a futures
trader. A lack of focus, a lack of motiva-
tion and an imbalanced career mix made
him think he should reignite his on-again,
off-again passion for trading equity index
futures. This book reflects his new push
to release that buried potential. In chroni-
cling his trading hour by hour and day by
day, the diary offers an insight into what it
takes to become a successful trader.
Miller decided to refocus his energies
such that he would for a year immerse
himself in trading, as he puts it, eat
sleep, drink, dream and
live the world of intraday
index futures trading with
the goal of increasing his
retirement fund by $1
million. Evidently he
succeeded.
What makes this diary
of a trader interesting
is the level of detail that
Miller provides about his
hourly and daily activities.
He demonstrates how he
recognizes his strengths
and weaknesses, reaches
or falls short of his daily
goals and analyzes his results.
Ultimately, trading financial markets
is a human endeavor that requires guts,
patience, determination, controlled
aggression and downright tenacity
traits that a serious sports player would
exhibit to win a game. In fact, the author
peppers his diary entries with sports
analogies, especially those relating to the
Boston Red Sox baseball team. Playing
poker may be a pre-requisite to a suc-
cessful career in futures trading, as are
lessons learned from life.
The author takes into account the
vicissitudes of life, and notes that trad-
ing futures can be a dizzying rollercoast-
er ride that embraces the elation of big
gains and the disappointments that fol-
low the intermittent market lows.
In Millers universe there is no such
thing as the perfect trade. Markets are
less than perfect, as are trade sequences,
traders, brokers, regulators and humans
amid the backdrop of an imperfect world.
Another theme of the book is that a
futures trader should be flexible in his
trading style and expect that a business
plan may need to be revised or tweaked
on occasion. Just as there is no correct
way to trade as long as gains exceed
losses and costs there are also multiple
ways in which to incorporate a trading
plan into ones life
Is this a book about trading or life? Ill
let you decide, Miller says.
Patrick Kelly is a freelance writer with a
background in commodity market reporting.
BOOK REVIEWS
50 FUTURES October 2013 DIGITAL EXCLUSIVE
The Trading Methodologies
of W. D. Gann:
A Guide to Building Your
Technical Analysis Toolbox
By Hima Reddy
FT Press
$35.99: 199 pages
BY LESLI E N. MASONSON
Among some stock market profession-
als, W.D. Gann has a reputation for
being one of the top traders and market
forecasters of all time. Numerous trad-
ers and technicians have adapted Ganns
methodology. He certainly was a prolific
analyst, chartist and writer (10 books and
courses). Whether he was as skillful and
talented as his followers believe still is to
be determined.
Hima Reddy, CMT, an independent
trader, became familiar with the sub-
ject of technical analysis and Ganns
work while still in high school, because
of her fathers introduction of the sub-
ject matter. After receiving her bach-
elors degree in finance, she immersed
herself in the markets and Ganns work
and became self-taught. She primarily
studied Ganns book titled How to Make
Profits Trading in Commodities in learning
his approach and expounding upon it
in this book.
Reddys stated goal is to enable the
reader to become a better trader and
not to make you Gann expert through
this book alone. This book is a valu-
able resource in light of the massive
amount of material produced by Gann.
The author focuses on his trading rules,
principles and methods covering them
with charting examples and explana-
tions. She begins by reviewing a number
of Ganns forecasting/trading successes,
but neglects to include any failures.
Then using Ganns trading methodol-
ogy, Reddy delves into pattern recogni-
tion and time duration relationships,
momentum analysis using the Relative
Strength Index, Fibonacci numbers, mov-
ing averages and channel analysis. She
found that the interpretation of certain
charting tools such as trend lines and
oscillators (RSI and Williams %R) are
improved by applying Ganns principles.
Although Reddy mentions that she
uses Ganns trading approach and rules,
she provided neither performance data
nor backtested results. Therefore, read-
ers must decide for themselves the value
ranked the same by Black-Scholes and
LLP, because both models are based on
the price range forecasts implied by cur-
rent put and call prices.
Volatility comparison (page 27) shows
how the two models compute volatilities
for the set of calls on softs futures on June
3, 2013. The percentages are heights of call
price curves measured by the LLP model
at the point where the futures price equals
the strike price, compared at each expira-
tion date with the Black-Scholes standard
deviation.
Dollar variations: Price curves
(above) shows another potential trading
technique provided by the LLP pricing
model. For the March 2014 calls on softs
futures, the difference from the call price
curve is computed. All but the coffee calls
have price variations peaking at approxi-
mately $20 while the highest variation for
March 2014 coffee calls is $87.
Of course, the variations shift contin-
uously and any trade based on specific
dollar amounts should be based on a lon-
ger-term comparison. In this case, selling
the 170 strike at 4.73 ($1,773.75) while
buying the 210 strike at 1.80 ($675) on
June 3 would have resulted in a gain on
June 7. The 170 strike would be bought at
4.32 ($1,620) as the high dollar variation
declined, while the 210 strike was sold at
1.56 ($585.00) for a net gain of $63.75.
Having two options pricing models that
are compatible with each having special
abilities in terms of estimating underly-
ing volatilities, recommending spreads
between strike prices and expirations, and
computing pricing equations would seem
to have definite advantages. As indicated
by the softs futures example, there are
many interesting and potentially profit-
able aspects revealed by closer inspection
of the Black-Scholes and LLP models.
Paul Creti en i s an investment anal yst
and financial case writer. His e- mail is
PaulDCretien@aol.com.
A simple trading technique could establish long or short trading strategies based on
underlying pricing variations from the pricing model.
DOLLAR VARIATIONS: PRICE CURVES
120.0
80.0
40.0
0.0
-40.0
-80.0
Calls on March 2014 futures
Orange juice Coffee Sugar Cotton Cocoa
0.45 0.55 0.65 0.75 0.85
Futures price/Strike srice
Cretien continued from page 49
of Ganns methodology by either paper
trading, backtesting or trading real-time.
According to Gann there are three
components of a trade: Entry price,
price objective and stop price. They all
must be precisely determined before the
trade is put on. He had specific rules for
protecting profits using stop orders, as
well as indicators to use to determine
when to go long and short, and how to
sell and go short. Gann believed that the
50% retracement was the most impor-
tant retracement level. Moreover, he
used a combination of price, patterns
and time in his trading, as well as using
simple OHLC charts to identify patterns
more easily.
As a guide to Ganns
works, the last chapter
provides practical informa-
tion on his writing style,
references and mathemat-
ics. Moreover, useful tips
on charting, software and
indicators are included to
guide the reader who plans
to study Ganns works in
more depth. Reddy rec-
ommends reading Ganns
books in the order they
were published and pro-
vides a source for them.
This book is an excellent primer on
Ganns basic trading rules. Written in
a clear and concise style
with many charting exam-
ples, the author provides
an easy-to-understand
introduction to a well-
known, rules-based trader.
For those readers inter-
ested in learning about
Ganns trading approach
this book a worthwhile
first step.
Leslie N. Masonson is a day
trader and the author of Buy
DONT Hold and All About
Market Timing (Second Edition). Reach him
at lesmasonson@yahoo.com
DIGITAL EXCLUSIVE futuresmag.com 51
DIGITAL EXCLUSIVE 52 FUTURES November 2013
Q & A continued
Nessler continued from page 18
Thats our approach; its a little more pragmatic. We realize you
dont always get the bang for the buck right away, but as a public
company, we dont look at the day-to-day, quarter-to-quarter
earnings because [of] our structure and ownership. Its more
of a year-on-year growth, building something that will be there
two to three years out.
FM: Do you feel customer confidence has come back?
PN: When you talk to the ag side, theyre just as brow-beaten over
the last few years because of the smaller crops. Were starting to
hear that this years corn crop has really done well. Thats a new
beginning, and a new dynamic of where prices may go. Last four
years farmer always saw $7.00 corn. If you put a decent crop on
top of this years crop, farmers will have to start looking at things
differently, [like] valuation of land. From the ag side, the morale
was down because weve had two to three years of unprecedented
droughts. This year well get back to normal, and elevators will
have carrying charge markets. And we get back to a normalized
industry of the early 2000s. But the last three years have been
tough on the whole industry.
FM: Does the Farm Bill still have impact?
PN: The Farm Bill has turned into a political volleyball because
[its] got food stamp programs and everything [included]. From
the Farm Bill loan rates [view], corn is $1.95, soybeans are $5.00
and your target price within the Farm Bill is $2.63 for corn and
$6.00 for beans. Were so far above that its not even an issue. I
dont see [the government] increasing target prices.
When we went to Freedom to Farm in the Farm bill, it was a
good move; it probably got exacerbated by the ethanol curve we
talked about, but thats settled down, unless they were going to
mandate new bushels, new gallons that are corn-related, but, in
this political environment, it would not pass.
[And] we are getting new areas of growth globally...if you look
at the balance sheet, next year we probably [will] have to get rid
of 4-5 million acres of corn because we have that big of supply
on hand. At the end of the day its going to be about price dis-
coveryand the relationship in the Midwest between corn and
soybeans. Right now soybeans are gaining on corn quite a bit,
and that will give farmers an indication of what they want to
plant. Go back to Nov. 2012 and the ratio of Nov. 14 soybeans
to Dec soybeans was 2.12 to 1; its now 2.44, so what youre see-
ing is were incentivizing farmers theoretically to plant more
soybeans next year and less corn.
FM: What new trends, U.S. or globally, do you see in the ag
business in the next 5-10 years?
PN: Continuation of the global trade in respect to production that
is not just U.S.-centric but global: Brazil corn, Black Sea wheat,
etc. The U.S. will be a cornerstone but we now see other countries
able to produce, not yet at the rate of yield per bushel the U.S. has,
but growing. There also will be continued consumptive growth
in China and other countries as dietary needs come more in line
with first-world countries. And new and improved infrastructure
in Brazil will be a huge factor to move product quicker to export.
That will take time but will be huge down the road.
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OF OF OF OFFFFFFFFFFF O RO OOOF OOOF O ROF OF ROF FF RO RO RO OOF OF OOF O TT ITSSSS IIITT ITTTTS SSSSS IIIIT ITTTTTTS IIITSS OFF OF OFFFFFFFFFF OOOOF OOOF O ROF OF ROF FF ROOF OF OF O TT ITSSS IITT ITTTTSSSSS IIIIT ITTTTTT IIITSS OOF OOOOOOOOOF RRO RO OOF OOOOOF OFFF OFF OF OO RO OOF ROF ROF ROF O ROF ROF FF OF OF OOOF OF ROF OFF OOOF OOOF OFFFF ROF FF OFF OFF OFFFFF OFFF OOFFFFF OOO TTS SSSSSS IT ITT ITT ITTTTS S IIIT IT ITTTTS S ITTTS IIITTTTS SSSS IIITTTTTT IIITTTTTT IIITTTTTT IITT IT IIITTTTS IIIITTTTT F OFF OF OO RO OO ROF ROF ROF O ROF OFF OFF OOOF OF ROF OF OOOF OOOFFFFF ROF F OF OF OFF OF OOFF O TTSSSSS IT ITT ITT ITTTTS IIIT IITTTS S ITTS IIITTTSSSS IIITTTTT IIITTTTT IIITTTT IITT IIIITT IIIITTT OO RRO RO OOOF OOOOOOOOOF RRO RO OOF OOOOOF O
KKKK K
GGGGGEEEEEEEEEEEEEESSSSSSSSSSSSSSSS ESSSSSSSS GGEEEEEEEESSSSSSSSS OOOOOOOOORRRK RKKKKK KK RRRRK RKK RRRRKKKK RK RRRRRKK RRRRKKK RRKKKK RRK RK RRR OOOOOORRK RKKKK KK RRRK RKK RRKKK RK RRRKK RRRKKK RKKKK RRK RRRRRRR SSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSS OOOO EEES OOOORR ORR SSSSSSSSSSSSSSSSSSRRRRRRRRRR SSSSSSSSSSSSSRRRRRR SSSSSSSSSSSS GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGE GGE GGE GGGGE GGE GGGGE GGE GGGGE GGE GGGGGGGEEEEEEEEEEEEEEEEEEEEEEEEEEEES EEEEEEEEEEEEEEEEEEEEEES EEEEEEEEEEEEEEEEEES EEEEEEEEEEEEEEEEEES EEEEEEEEEEEEEEEEEES EEEEEEEEEEEEEEEEEES EEEEEEEEEEEEEEEEEES EEEESSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSS EEEEEEEEEEEESSSSSSSSSSS EEEEEEEEEEESSSSS EEEEEEEEEEESSSSS EEEEEEEEEEESSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSS GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGE GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGEEEES EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEESSSSSS EEEEEEEEEEEEEEEEEEESSSS EEEEEEEEEEEEEEEEEEESSSS EEEEEEEEEEEEEEEESSS EEEEEEEEEEEEEEEEEEESSSS EEEEEEEEEEEEEEEEEEESSSS EEEEEEEEEEEEEEEESSS ESSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSS EESSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSS
NNNNNNNN AN NNNNN NNNNNNNNN AN NNNN NNNNNNN NNNNNN NNN NNNNN NNNNNNNN NNNNN NNNNNN NNNNN NNNNNNNN NNNNN NNNNNNN NNNNNN NNN NNNNN NNNNNNNN NNN NNNN EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE YE YEE YEE YEEEE YEEEEEEEEEEEEEEEEEEE YE YEEEEEEEEEEEEEEEEEEEEEEE YEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE YEEEEEEEEEEEEEEEEEEEEEEEE YEEEEEEEEEEEEEEEEEEEEEEEEEE
LLLLLI L OOOOOO LLIOOOO L O LLIO IOOOO L OO LLLLLI IOOOOOOOOO LLLI IIOOOOO L OO LLLIO LIOOO LIO LLLLLLLLLLIO LLLIO LIOOOO IOO L O IO IOO L OO LLIIOOOOOOOO LIIIOOOOO LLLIO LIOOOO LLLLLLLLLLIO LLLI
DIIVVVVVVV DDDDDDDII DIV DIV D V DIV IV DIV IVVV DIVVVVVVVVV DDIV DDDI DDDDI DIV DIV IV IV IVV IV IV DIVVV DDIV DIV DI DIVV IV IVVVVVV DDDDIV D V IVV DIVVVVV D VV IVV DIVVVV DDDDDDDII DIIVVVV DDIVV DDDDIV DDDDDDDII DIIVVVV DDDI DIVVVV D VV DIIV DDIV DD ERS ER ERS EEERS ER ER ERS RS RS RS EE S R ERRS S E S R ER ER ERR ERS ERS EEEERRS SS EEEEER ERS RRRSS ERS EEEEEERRRSS ERS S EEEEEEERS EERRRRRRS S EEERS EEEEEEEEEER ERS EEEEEERS ER EER EEEERRRR ER EEEEEERRRRRS EEEEEEEER IFI IF IIF IF IF IIFI F IF IFI FIIIIIIIIIII FFIIII IFFIIICCCA CA CA CAT CAAT CA CCCCAAT CAAT CA C ION IONNNN ION IOOO IONN
DIV DI D V DIV IIVVV DIVVVVVV D V DDII DI DIV IV IV IV IV IV DIVV DDIV DIV I DIVV IV IVVVVV DDDDIV D V IVV DIVVVV D VV IVVVVV DDDDDDII DIIVV DDIV DDDIV DDDDDDDIIIIVV DDIIVVVV D VV DII DD ERS ER ER EEERS ER ER ERS RS SS EE S R ERS S E S R ER ER ERR ERS ERS EEERRS SS EEEEER ERS RRRSS ERS EEEEEERRRSS ERS S EEEEEEERS RRRRRRS S EEERS EEEEEEEEEER ERS EEEEEERS R ER EEEERRRR ER EEEEEERRRRR EEEEEEEE IFI IF IIF IF IF IIFI F IFI FIIIIIIII FFIIIIIICCCA CA CAT CAAT CA CCCCAT AAT CA ION IONNNN ION IOO IONN
VV DIV IIVVVVVVVVV DIVVVV DIIVVVV I DDDDDDDIIIIV RRS S RS SSSS R E SSSSSS EEEEEEERRRRRS EEEEEEEEEE IF IF IIIIIFF AAT CAAT CAA IOO IOO
V DIVVVVVVVVV DIIVV I DDDDDDDIIII RRS RS SSSS R E SSSSS EEEEERRRRS EEEEEEEEEE F IF IIIIFF AAT AAT A IO IOO
ANN AAN MMMMAANN MMM AAAGGGEE A DDD FFFFUT TU UT RES EES
MAN MMAN MAN AAAN MAN A MMANN MAN MAAA MAN MAN MMAN MA MANN MMMMAAN AANNNN A MMMAA MANN MMAN MMMAAN NN MAAAN N MMAN MAN A MMMMAN MAN NN MAA MANN MMMANNN MMANN MANNN M AAAAAAG AGE AGEEE AAAAG AAAAAAAAAGE AAAA ED F DDDDD F F DD FFFFF DDD F FF DDD FF DDD F DD F FFFFFFFFFFFFFFUT TTU U UTU TU UT TU UTU TU UT TU U UTU TU UTU T RESS RE RES RES RES RE RES RRESS RES RRE RESSS RREESS
MAN MMAN MAN AAAN MAN MMANN MAN MA MAN MAN MMAN MA MANN MMMMAN ANNN MMMAN MMAN MM NNN MAAN N MM N MAN A MMMMAN M NNN MA MANN MMM NNN MMANN MANNN M AAAAAG AGE AGEEE AAG AAAAAAAAGE AA ED F DDDDD F F D FFFF D F FF DDD F DDDDD F FFFFFFFUT TTU U UTU TU UTU UTU U U UU UTU U UTU T RES REES RES RES RE RES RRESS RES RRE RESSS RREESS
BEN BEN EE EF EFI E TTT HHH T OOLDD OOO S U UPP
BEN BEN BENNNN EENN B EF EF EFI E I EFII EFIT TTT HHHH TT H T HHH T OOLDDD LD OOOLD OOOLD LDDDD OOOLD OOOOO D LDD OOOO S U U S U S U S U UU SSS UPPPPPPPPP
BEN BEN BENNN EENN B EF EF EFI E I EFII EFITTTT HHHH TT HHHHOLD LD OOOLD OOOLD LDDDD OLD OOOO D LDD OO S U U S U U S U UU SSS PPPPPPP
TO TTTTO TTT
BBR R BR R B OOOKKKKKEERS
BR R BR R B OOOKKKKERS
GGGGGGG
PP
HI H
???? GGH? GH? G
LLLL K L KKKKKKKKK L K KKKKKKKK LLLL K KKKKKKKKKK L KKKKKK L KK L KKK L KK L K KK L KK LL EEEEEP EE EEP EEP EEP EPPPPP E P EEEPP EEP E PP E P EP EEPPPP
L KKKKKKKK L KKKKKKK L KKKKKKKKKKKK L KK L KK LL K KK L K LL EEEP EE EP EEP EEP EPPP EEEEP EEEEP EEPPP
GH? ??
HI HHHH GH? GH? H?? H? GH? H? GH? ? H?? H GH? G HI HHHH GH? GH? H?? H? GH H? GH? H? H GH G
R
EQ EQ EQQUUUU TTT UU EEQQQQQQQQ EQ EQQQQQQU QQU QUUUU
LLL WWIILLLL TTTTTTTT LLLL HHHEEEE HHEEEE H LLL WWIIL WIL IL IL WWILLLLLL TTTTTTTT LLL TTT LLLLLL T L TTTT LLL T L T LL TT LL HHE HEEE HEE HE HHEEEEEE HHHHE HE HE HHHEE HE HHEEE HHE HEE HE HE HE HEE E
L WWIL WIL IIL WWILLLL TTTTTTTTTTT LLLLL TTT LLL TT L T LL HHE HEE HEE HHEEEEE HHHHHE HHE HE HHEE HHE HE HE HE HE HEEE
RIDD RID NG NNN RIDDD RID RIDD RI ING ING NG NG ING ING
RID RID RIDD I ING INNNG I GGGGGGG
RRI RIDDING INNG NG
RRI RIDDIN ING
BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB
GGGGGGGG
UUUUL L UUUUUUU BU UUL UL LLLLL U BU BULL UUUULLL U BBULL UULL BU UULLLLL BU UUULLL BU UUULL U BU B L BUUUU LLLLLLLLLLLLLL UUUUUL UL LLL UUUL UULL UUL U BU UULL BU UULLL BU UUULL UUL UU LLLLLLLLLLLLLL
HI H GG HI HI HI H GGGGGGG I HI HH GGGG
BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB
EQ EQQ EEQ EQQQU QUUUUUUIT ITTYY TTYY TYY TY YYY ITTTTY TY ITTTYY ITY TY YYYY ITTYY ITTTY Y ITTTY ITTY ITTTTY TTTY YYY MMMM
QUUUUUIIIITTTTYY
EEEEEEEEEEQQQQQQQQQQQQUUUUUUUUUUUUUUUUUUUUUUUUIIIIIIIIIIIIIIIIIIIIIITTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT UUUUUUUU
YYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYY
EQ EEQ EQ EEEQQQQ EQU Q EQQQQQQQQQQQQUUUUUUUUUUU QUUUUUUUUUUU QUUUUUUUUUUIIT IIIT IIIIT ITT IITT IT IIIIIT IIIIIT IIT IT IIT ITTTTTTTTTY IT ITTTTTT ITTTTTTTY ITTTTTTTTTTTTTTTTTTTTTTT IT ITTTTTT ITTTTTTT ITTTTTTTTTTTYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYY TY YYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYY TY YYYYYYYYYYYYYY MMMMMMM
QUUUU TT U EEQQQQQQ EQ EQQQU QQQUUU QUUUITTTTTTTYYY
UU EEQQQQQQUUUUUU EQ EQQQQQU QQQUUUUUUUIIIITT IIIITT
QUUUUUIITTT ITTTTTYYY
UUU EEQQQQQQUUUUUUUUUUUU EQ EQQQQQU QQQUUUUUUUUUUUUUUIIIIT IIIIIIITTT
TUR TURE TUR
|
MAG COM
MAG.COM
MAG.COM
|| MARCH 2013
MARCH 2013
OP 50
TTOP 50
TOP 50
FUTURESMAG.COM FUTURESMAG.COM |||||| MMMAAAY 2013 13 Y 201 Y 201 AAAAAYYY AAAA
TT
RSS
AAAAAAA R AAAAAAAAA R AAAAAAAA R R AAA RR
DDDI CUSSION W TH H
DDDDDDI DIS DDDDD CUS U SION WITH H
DDDDDDI IS DD CUSSION WITH H
TTRR
RSS
TTR
RSS
OOOO WWW
USSI USSI UUSSI USSI USSI USSI USSI USSI USSIOOOOOOOOOOO
N A
NN ON W ON W N W N
NN
NNNN ON ON ON ON ON ON ON
ACT ACT
WWWW N W N W N W N W N W N W N W
II
WWWWWWW
N
TT WIT IT IT T
ON ON
IT TTT WIT WIT WIT WIT WIT WIT WIT
GGGGOOD AS GO
TRY LE TRY E LE
OOD OOD
TR TR TR TR TR TR TR
AS AS
Y L Y L Y L Y L Y L Y L Y L
GOLD GOLD
EADER ER EADER ER EADER EADER EADER ER EADER EADER
LS LS
NG NG
S ES ES ES T S EEES TTTE INN T N T NN TTTT G I GGGG S THHHE EEE
TT
TT
DDDDDDDDDDDDDDDDDDDDDIIIIIIIIIIINNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN
LLLLLLLLLLLL
GG NG G NG GG NG GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG NNNNNNNNNNGGGGGGGGGGGGGG
LLLLLLLLLLLLLLLLDDDDDDDD LD DDDD LD D LD DDDD LD DIIII DDDIIIIIIIIIINNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG
TTTE EES EES ESSS ESSSS ES ES ES EES TE ES ESS TESS TE EESSSS EESS TE EEESSS EEES E TTE EEEE TTTTTTIN TINNNNN TTTTI TTTTTT NNN TTINNN T NN INNN TTTIN TTTIN TTTTINN TTTT GGGG GG III G GG G II GGG I GGGGGG GGGG S T S HHHHE EEEE H
TTTE ESS ESSSS ES E TE EESS TES ESSS ESS EEESS EEES E TEEEE TTT N INNNNN I TTTT NNN TINNNN INNN TTTIN TTTI TTIN T GGGGG II GGG II GGGGGGGGGG S T S HHE EEEE
AAR AARRRR PP DD PP DDDDD ART RT A
AAR AARRRRD PPP DD PP DDDDDD PART RT A
RRRRD PP DD PP DDD PART RT
TTRRR TTTTTTTTTTTTR TTR TR TTTTTTTTTTTTTTTTRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR TTTTTTTTTTTTTTTTTTTRRRRRRRRRRRRRR TRR TRRRRRRRRRRRRRRRR ND NDDD N
CCCCCCCCCC
R
C
NNGG NGG
K E EE E KKK EEE KKE KK
INN PPINN P N PIN I PPP G A GG A A GGG A GGG NNNN E EEEEEYYYY
RRRRRRRRREEEEEENNNNNNNNNDDDDDD CCCCC
NNNNGGGGG
RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRE RRRE E RRE EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEENNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD CCCCCCCCCCCCCCCCCCCCCCCCC
RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRE RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRREEN EEEEEEEEEEEEEEEEEN EEEEEEEEEEENNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD CCCCCCCCCCC
NNNNNNNNNNNNNNNNGGGGGGGGGGGGGGGGGGGGG NNNNG NNNGG NNNNNNNNNNG NNNG NG NNNNNNNGGGGGGGGGGGGGGGGGGGGGGGG
KKKKKKKKKKKKKEEEEEE EE EE EEEE K EE EE EE EE KEEEE KKEEEE KEEE KEEEEEEE KKKKKKEEEEEE EEEE EE EE KKKKKEE KEEEEEEE EE E KKKE KEEE EEEE EE EE KKKKKEEEEEEEEEEE EE EE KKKEEEEEE EE KKKEE KEEEEEE EEEEE KKEE PPPPPIN PPPPIN PIN PINN PPIN PPIN PPPPIN PIN PPIN PIN PPPPPPPPPPIIN I PI PPPP G A G A G A A G A G A GGGGGGGG A G A A GGGGGGG A GGGG A GGGGGGG N NNNN EEEEEEEEEEEEEEYYYYYYYYYYYYYYYY
KKEEEEEE EEEEE K E EEE EE KEEEE KKE KEEE K E KKKEEEEEE KKKKEEEEEEE EE KKKKEEE EE KKKKEEEEE EE KKKEEEE EE KKKEE KEEEEEE EEEE KKE PPPPPPPIN IN P N PIN PPIN PPPIN PI PP N PI PPPPPPPPPIIN II P GG A G A A G A G A GGGGGG A G A A GGGG A GGGG A GGGGG NNNNN EEEEEEEEEEEEYYYYYYYYYY
OOON ONNNNNNNN OOOON ONNN ON OOOOONNNNNNNN OOOON OOOOON OOONNNNNN OOOONN OOOOONN VIX XXXX VVI VVVIXX VVI VVV XXX
ONNNNN OOONNNN OOOOOONNNNNNNN OOON OOOOOONNNNN OONN OONN VIXXX VI VIXX VVI VVV X
OUUU OUUU OUTTTTTLLOOOOO LLLLO OOOO OOOOO LL KK 2222 K 2 KKKKK
NN C NN CAAA CCCA CCC H THH TTTTT EE L E GGGGGG OOOOOONNNNGGGG
PPRRRRRRRR PPPPPRRRRRRR
NNNNNNNNNNGGGGGGGGGGGG NG NNNG NNGGGGG
OUUUUTT UT O TTTT O TTTTTTTT UUTTTTTLLLO LLO LO OO OO L OOOOOOOOO LOOOOO LOOOO OOO LLOOO L
2 KK 2 K KK 2222222222 KKKKKKK 2222222 KKKK 22 KKKKK K 222 KKKKKKKKK
UTT UTTTTTTTTTTLLLLLO LO OO OO L OOOOOOO LOOOOO LOOOOOO LOO 2 K K K 2222222222 KKKKKK 2222222 KKK 22 KKKK K 222 KKKK
CA CAAN CAN CAAN C TTHHHH TTTH LL EEE L NNNNNGGGGGGGG OOOOOOOON
CAAN CA CA CCANN CAAN CANNNN CAAAN C N CCA CAN ANNNN AANNN ANNN CCA CANN CANNN AAN AAAAAANNNN CAN A CAAAN CCCA CAAAAN A CCCCCCAAAN CA CCCA CCC TTTH THH TH TTTTTHH THH TTTTTHH TTTTTTTTH TTTTTTTTTH TTTH TTTTTTTTTH TTTTTTT E L EEEE L LL E EE LL E L EE L E L L EE L EE L L EEE LLLL EEEE LLLL E E LLLLL E L L E ONNNNNNNG NNG NG NG GGGG OOOOOOOONNNNG NG GGG OOONNNNNG G NG G OOOOONNG GGGG ONNGGG O GG OOOOOONNNNNNNGGGGG ONGG OOOOONNNG NG GGGG OOOOONNNNNG NG NG GG OOOONNNNNG ON OOOOOOOOONNNNNGG
CAN A CA CANN AANNNN CAAN C N CCAANNNNN ANNN ANNN CAAN ANNN AAN AAAAANNNN CAN AAAAN CCA CAAAN A CCCCCCAN CCCA C TTHHHH TTTTTHHH TTTTHH TTTH TTTH TH TTTTH TTT E L EEEE L LL EEE L E L EEE L E L EE L EEE LLL E LL E LLL E L L E ONNNNG NNG NG GGGG OOOOOONNNG NG GGG OONNNNG NG G OOOOONNGGG ONNGGGG OOOONNNNNNNGGGGG NG OOOONNNNG GG OOONNNNNG NG NG G OOOONNNNNG ON OOOOOOOOONNN
BBBE BEE BEE BE CCOOOOONNN CON CCCCCOOOO CCOO COOONNNTTTAAAA TT E NE NN TAA TTAAAAAI AII TTTAAA E NE NNNNEE NNNNNNEEE TA TTAAI AI EE NNNE NNNNEE
BBBE BE BEEEEE EEE BEEE BE CO CCOOOO CCCOOOONNN CON CCCCCOON ON CCCCCCCCCCOOOON CCCCCCCOOOON CCCO CCCCCOOONNNN CCCCOON NNNN CCCOOON NNN ON O COOONNNTTTTTA TAAAAAAAI TA TA TA TAAA TTA TAA TAAAAI AI TAAAAAAAAAI TAIII TAAAI TTTTTTA TA TAAAAII TTTTTAAAII TTAA TTTTTA TAAI TTTTTTA NE NNNE NNNNE NE NNNNNEEE NNNNNNNNE EE NNNNNNE NE NE NNNNNNNNNNE NNN
BBEE BEEEEE BEE BE CO CCOOO CCOOOONNN ON CCCCCOOO CCCCCCCCOOON CCCCOON O COONNNN COON NNNN CCCOOON NNN ON OOONNTTTTTAAAAAI TTAAAAA TTAAAAAI AI AAAAAAAI AIII AAAI TTTA TAAAII TTAAII TA TTTA TAAI T E NNE NNNE NE NNEE NNNNNNE E NNNNNE NE NNNNNNNE NNN
PPPPPPPRRRRRRRRRRRRRRRRRRR PPPPPPRRRRRRRRRRRRRRRRRRR PPPPPRRRRRRRRRR PPPRRRRRRRRRR PPPPPPPPPPPPRRRRRRRRRRRRRRRRRRRR PPPPPPRRRRRRRRRRRRRRRRR PPPPPPRRRRRRRR PPPPRRRRRRR PPPPPPRRRRRRRRRRR PPPPRRRRRRRRRRR
EEEEEGGGGGGGGGGGGG HHEE HHEEEE HHEE HHEE NNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNGGGGGGGGG NGGG NG NG NG NGGGGG NGGG NG NG NGGGG NGGG NG NG NGGGG NGGG NG NG NGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG NNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNG NNNNNNNG NNNNNNNNNNNNNNNG NNG NNNNNNNG NNG NNNNNG NNG NNNNNNNNNNNNNG NNNNNNNNNG NNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNG NNNNNG NNNNNNNNNNNNNNNNNNNNNNNNNG NNNNNG NNNNNNNNNNNG NNNNNG NNNNNNNNNNNNNNNNNGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG
OOOFFFF OOOOO D WWWWWWWDDDD WW GGGGGGGGAAAAAAA
OOOF OFFFF OOOOOOFFFFF OOOOOOOOFFFFFF OOOFF OOOOOOOFFF OOOOOOOFF OOOOOO WDD WWWWWWWWDDDDDD WWWWWWDDDD WWWWDDD WWWWWWWDD WWWWWWWWWWW GGGGGGGGGGGGGGGGGGGGGGAAAAAAAAAAAAAAA
OF OFFFF OOOOOFFFFF OOOOOOOFFF OOFF OOOOOFFF OOOOFF OOO WDD WWWWDDDD WWWWDDD WWWDDD WWWWWWDD WWWWWWWWW GGGGGGGGGGGGGGGGAAAAAAA
INNN IINN PPPPPPI PINNNNNNNN PIN PI PPPPIN PPPPPIN INNNNN PPP NN AAA GG A AAA GG A AAA GGGGGGG AA GGGGGG A G AA GGGGGGG A A GGGGGGGGGGGGGGGG NN EEEEEEE NNNNNN EEEEEE NNNNNNN EEEEE NNNN EEEE NNN EEEEE N EEEE NNNNN EEEEEE N E NNN EEEEEEEYYYYYYYYYYYYYYYYYYYYYYY
INNN INN PPPPPPI PINNNNNNNN PIN PI PPPIN PPPIN INNNNN PPP N AAAA G A GGGG A GGGGG A G A GGGGG A GGGGGGGGGGG N EEEEE NN EEEEEE NNNNN EEE NNNN EEEE NNN EEEE N EEEE NNNNN EEEE NNNN EEYYYYYYYYYYYYYYYYY
INN INN PPPPIINNNN PIN I PPIN PPPPPIINNN PP NN AAA GG A A GG A GGGGGGGGG A G A GGGG AA GGGGGGG N EEE NN EEE NNN EE NNN EE NN EEE NNN EEEEEEE NN EEEEEEEYYYYYYYYYYYYYYYY
IN INN PPPPIINNNN PIN I PPIN PPIINNN P N AAAA G A GGGGGGG AA GG A G
EEEEE NNNNNN EE NN EE NNN EEEE NN EEYYYYYYYYYYYY
IN INN PPPPIINNNN PIN I PPIN PPIINNN P N AAAA G A GGGGGGG AA GG A G
EEEEE NNNNNN EE NN EE NNN EEEE NN EEYYYYYYYYYYYY
PPPPPPOR POR PPO POR POR POR PO POR O PPPO POR PPPPPPPPO PO PPOR POR PPPPPPPO PPPPPPO POOO PO PPPOO PO POO POOR R PPPO PPPPPP R PPPPOO TTTTTFO FO FO FOOOOO FO FOOOO TF TF FO FO TFO OO FOO TTTF F TF FOOOOO TTTTF FOOO TF FFFOOOO T O TF FF TF TF F TFO TTFOO TTFOOOO FOOOOOOO TTTFOO T OO T LLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLL
PPPPPPOR POR PPO POR POR POR PPOR O PPPO POR PPPPPPPPO PO POR POR PPPPPPPO PPPPPOO PPPPO POOOOR PPPO PPPPP R PPPO TTTFO FO FO FO FO TF FFO FO FOO FOO TTTF FFFOOOOO TTTFOOO TF FFFOOOOO TF FFFFFFO TFOO TTFOOOOOOOOO TT OO TT LLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLL ONNN ON ON OOON ONN ON OOON ONNN ON OOONNNN ON OON ONNNNN N OOOOONN OON O VVVI VVVIX IX IX XX V XX VV XXXXX V XXXXX V ONN ON ON OON ON ON OOON ONNN ON OONNN ON OONNNN OOOON O VVVVIIIX XX V X VV XXXXX V XXXX V ON OON OON ON ON OOON ONN ON OONNNN ON OON ONNNNN N OOOON OO VVVI VVVIX IX IX XX V XX VV XXXXX V XXX V OON ON OOOOON ONN ON ONN ON OONNN OOON O VVVIIIX XX V X VV XXXX V X V ON OON OON ON ON OOON ONN ON OONNNN ON OON ONNNNN N OOOON OO VVVI VVVIX IX IX XX V XX VV XXXXX V XXX V ON OON OON ON ON OOON ONN ON OONNNN ON OON ONNNNN N OOOON OO VVVI VVVIX IX IX XX V XX VV XXXXX V XXX V OON ON OOOOON ONN ON ONN ON OONNN OOON O VVVIIIX XX V X VV XXXX V X V
EE S R ERRRSSS ER EEE SSSIFF IFIICCCC
ERRS E SS EE S R ERRS SSS R EE SSSS FFI IF IFIICCA CCCCCA
ERR E SS EE S R ERSSS R EE SSS FFI IF IFIICCC FFFIIIIICCCA FFFIIIIICCC
OOOOOOOOOOOOOOOOOOOOOOOOOO
PPPPP
RRRRRRKEEE RRK RK K RKE RKK RRR E RRR E RRRK KKEE RRKK RK RKK R
TS TS TS TS TS TS TS TTSSSS TSSS TTSSSSSSS
RRRRKKKK TS TSSSSSSSSSSSSS
RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKE KKKKKE KKE KKKE KKKE KKKKKKEEEEEEE KEEEEEEEEEEEEEEEEEEEEET EEEEEEE KEEEEEEEEEEEEEEEEEEEEET EEEEEEE KEEEEEEEEEEE KEEEETTTTTTTTTTTTTTTTTTSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSS
RRRRRR
SSSSSS
KKKKKK
SSSSSSS TS TS TS TS TSSSSSSSSSSSS
RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRK RRK RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKK RK KE KKKK RK KKKKKKKKKK RK KKKKK RK KKKKKKKKKE KKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKEE KE KEEEEEE KKE KE KEE KE KE KEEE KEE KEEE KE KEEEEEETTTT KE KEEEEEE KE KE KEE KE KE KEEE KEEEEEEEEEEETT EEETS TTTS TS TS TTT ETS TTTS TTTTSSSSSSSSSSSSSS TSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSS TSS TSSSSSSS TSSSSSSSSS TSSSSS TSSSSSSSSS TSSSSSS TSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSS TSSSSSSSSSSSSSSSSSSSSSSSSSSS
L KK L K KKKKK LL
PP EP EEPP EEEEEEEE E
L KK L K L K KKKKKKKK LL KK EP EP EP EE EEPPPP EEEEEEEE EPPP EEEEP KKKKKKKK P EP EP EEPP EEEEEEEE EPP EE P
MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMAAAAAA MMAAA MA MAAAAA MMMMMMMMMMMMMMMMMMMAAAAA MA MAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAARRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR ARRRR
MMMMMA MA MA MMMMMMAAAAAAAAAAAAAAAAAAAAAARRRR AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAARRRR AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAARR AAAAAAAAAAAAAAAAAAAAAAAAAAAAAARRRR AAAAAARRRRRRRRRRRRRRR AAAARRRRRRRRRRRRRRRRRRRRRRRRRRR
LLLL LLLL LLL
MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM
OOOOOOO
II NN B DOLLAR DOLLAR R R
CCCCCCCCCCCCCCCCCCCCCCCCCCC
DOLLAR DOLLAR RR N D N D N D N D NN LLION LLIONNNNN BIIIL IL IIIIII BBBBBBBBBB
PPHAA PPP HUNT HUNTTT HU HU HUNT HUNTTTTTTTTT
TTTTTTTR TTTTR TR TTTTR TR TTTR TR TR TTTR TR TTTTTTTTTTTTTTTTTTTTTTTTTTTTTRRRRRRRRRRRRRRRRRRRRRRR TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTRRRRRRRRRR TR TTR TRR TRRR TR TR TRRR TR TRRR TR TTR TR TR TR
TT U HU HU HUNT HUNTTER TER TTTER TERAA HHHA HHAAAANNNNNNN TTTTT HHH RHHH RAAAA RRAAAAAAAAAA RRNNNNNNNNNN
RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRE RE RRRRRRRRRE EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEENNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNND NDD ND ND ND NDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD CCCCCCCCC D C DD CCCCCC D C DDDDDDDD CCH CCCCH CH CCCH CCH CCCCH CH CH CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCHHHHHHHHHHH
DDDDDDDD
HHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH
RRRRRRRRRRRRRRRRRRRRRRRR
AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAANNN AN AANNN AN
RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRREEEEEEEEEEEEEEEEEEEE RE EE RE EEEEEE RE EEEEEEEEEEEEEEEEEEEEEEENNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCHHHHHHHA HA HHHHHHA HA HHHHHHHA HA HHHHHHHHHHA HA HHHHA HA HHHHHHA HA HHHHHHHHHHHHHHAAAAAAAAAAAAAAAAAAAAANNN AAAAAAAAAAAAAAAAANN AN AN AAAAAAAAANNN AN ANNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN TTTTTE TE
FFANNNNN FFAANN FAAAAAAN FFF NIN NIN NINNNG P G P G P PPP GGGGG PPP GGGGGG
FANNING P
FF NNNNN FFANN F N FFF NNNNN PPPPPPPPP GG
FANNING P
FFFA FF NNNN ANNNN FFFFFAAAANNNN NN NINNNNNNNGGGG P GG PP GGGGGGGG
FANNING
FANNNNN FFFANNNN NN N NNNNNNNGGGGGGGGGGGGGG
FANNING
EEEEEEEEEEEEEEEEENNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNND ND ND NDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD C D C D C D C DDDD CCH CCH CCH CCH CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCHHH
DDDDDDDD
HHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAN AN AN AN
NNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCHHHHHHHA HA HHHHHHA HA HA HHHHHHHHHAAAAAAAAAANN AAAAAAAAN AAAAAANN AAAAAN ANNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN
FFFAANNNNNNNNN FFFA FAANN FFA FAAAN AAAN FFFFA FAAAAAANNNNNN FFAAAAN ANNN AAN AAAAAAANNN FAAANN FFFAAAN FFF N NIN NIN NINNNNNNNNNNNN NIN INN N NNNNNNNNNNNG P G P G P PPP GGGGGG PPP GGGGGGGGG PPPPPP GGGGGGGGGGGGG PPPPPP GGGGGGG PP GGGGGGGG
FFFAANNNNNNNN FFFAANN FFA FAAAAAN FFFFA FAAAAANNNNNN FFAAAANNNN AN AAAAAAANNN AANN FFFAAN FF N NIN NIN NINNNNNNNN NIN IN N NNNNNNNNNNN PPPP GG PPP GGGGGG PPPPPP GGGGGGGGGG PPPPPP GGGGGG P GGGGGGGG
FANNING P
FANNING P
FFANNNNNNN FFANN FAN AN FFFAANNNNNN FFAN ANNN AN ANNN ANN FF N FF N NIN NIN NINNNNNNNNNNNNNN N NNNNNNNNNN PPPPPPPPP GG PPPPPP G PPPPPP G PP GG
FANNING P
FANNING P
NN F N FFFFA FANNNNN AAAANN AAA NNNIN INNNNNNNN PPPPPP GGGGGGGG NN F N FFFFANNNNN AAANN AAA NNNIN INNNNNN PPPPPP GGGGG
FANNING P
FANNING P
NNN FF NNNNN AANNNNNINNNNNNNN PPPPPP G
FANNING P
FANNING P
FA FANNNN FF NN FFA FA FA FANNN AANN FFFAA FANNN FF NNN FFANN FFFFFAAAANNNNNNNNII NINNNN N NN INNNNNNN INNNNNNN INNN IINN NINN IIINNNNGGG PPPP G P G PP GGGG P G P PP GGGGG P G P PPP GGGGGGGGGG P P G P GGGG PP GGGGG P G P GGGGG GG P GGGGGG
FA FANNN F NN A FA FANNN AANN FFA FANN F NNN FANN FFFFAAANNNNNNII NINNNN N NN INNNNNNN INNNNNNN INNN IINN NINN IIINNNGGG PPP G P G P GGGGG P PP GGGGGG P PPP GGGGGGGGGG P P G P GGGG PP GGGGG P GGGGGG P G
FANNING P
FANNING P
ANNN F NN AANNNNN FFANNN F NNN F NN FFFANNNNNNNNNINNNN N NNNNNNNNNNNNNNNNNNNN N NNNNNNGG PPPP G G PPP G P PP GG P G P PPP GGGGGGGGGG P P G P GGGG PP GGGGG P GGGGGG GG P GGGGGG
FANNING P
FANNING P
NNN F N FFFFFA FAAN AANNNN AAAA NNIN NINNN INNN PPP GGGG PPPPP GGGGGGGG NNN F N FFFFFAAN ANNN AAAA NNIN NINNN INN PPP GGGG PPPPP GGGGGG
FANNING P
FANNING P
NNN F N FF N AANNNNNNIN NINNNNN PPPPPPPP G
FANNING P
FANNING P
NNN F N FFFFFA FAAN FAAN ANNNN AAAAAN F NNIN NINNN INNNNNNN PPP GGGG PPPPP GGGGGGGGG NNN F N FFFFFAAN FANNN AAAAAN F NNIN NINNN INNNNNN PPP GGGG PPPPP GGGGGG
FANNING P
FANNING P
NNN F N FF N AN ANNNN AN F NNIN NINNNNNNNNN PPPPPPPP G
FANNING P
FANNING P
APPPP PP P LLLYYYIINNGG NNGGG NNN TH TTHHH
PPLYING T
PPPP NNG NNG NNN TTT
PPLYING T
APPPPPPP AAPPPP P AAAAPPPP AAPP APP LLLYI LYYI YIII LY LYYYI LLLYYYYII LYYY NNNGG NNGGGG NNNNGGGG NNNNNGG NN TH TTHHH TH TT
APPPPPP APPP P AAPPP AAP AP LLYI LYYI YIII LLYYYI LYYYII LYYY NNGGGG NNNNGGGG NNNNG N TH TTHH TH TT
APPLYING TH
APPLYING T
PPPP AAPPP P AAPPP APPPP NNNG NNG NNNNG NNNNNGG NN TH TTTTT
APPLYING TH
APPLYING T NNNNNNNNNN AAAAAAAAAAAAAAAAPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPP I YYIII YINNN IIIINNNNNNNNNG NNNNG NNNNNNNG NG NNNNG NNNNG NGGGGGGGGG TTTTTTTTTTTTTTTTTHHH THH TH TTH TH T
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEENNN EEEEEEEEENNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNND ND ND NDDDDDDDD NDDDD NNNNND ND ND NDDDDDD NDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD CCCC D CCC D CCC D CCC DDDDD CCCCCCCCCCCC DDD CCCCCCC DDD CCCCCCC DDD CCCCCCC D C D C D C D C DDDDD CCCCCCCC DDD CCCCC DDD CCCCC D C D C D C DDDDDDDDDDDDDDDDDDDDDDD CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCH CCCCCCCCH CCCCCCCCH CCCCCH CCCCCCCCH CCCCCH CH CCCCCCCCCCCCCCH CCCCCCH CCCH CCCH CCCCCCCCCCCCCCCCH CCCCCCH CCCH CCCH CCCCCCCCCCCCCCCCH CCCCCCH CCCH CCCH CCCCCH CH CH CH CCCCCCCCCCCH CCCCCCH CCCCCCH CCCCH CCCCCCCH CCCH CH CCCCCCCCCCCH CCCCH CCH CCH CCCCCCCCCCCH CCCCH CCH CCH CCH CH CH CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCHHHHHHHHHHHHHHHHHHHHHHHHHHH
DDDDDDDDDDDDDDDDDDDDDDDD
HHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHAAAAA HA HA HA HA HAA HAA HA HA HA HAAA HA HAA HA HAA HAAA HA HA HA HA HA HA HA HA HA HA HAA HA HA HA HA HA HA HA HA HA HA HAA HA HA HA HA HA HA HA HA HA HA HAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAANNNN AAAAAAAAAAAAAN AAAAAAAAAAANNNN AAAAAAAAAN AA
NNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN
AAAAAAAAAA HHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEENNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN ENNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCHHHHHHHH CHHHHHHHHHHHHHHHHHHHHHH CHHHHHH CHHHHHHHHHH CHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH CHH CHHHHHHHHHHHHHA HA HHA HHHHHHA HA HHHHHA HA HHHHHHA HA HHHHHHHA HHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHA HHHHHHHA HHHHHHHHHHHHHHHHHA HA HHA HHHHHA HA HHHHHA HA HHHHHA HA HHHHHA HHHHHHHHHHHHHHHHHHHHHHHHHHA HHHHHA HHHHHHHHHHHHHHHHHA HA HHA HHHHHA HA HHHHHA HA HHHHHA HA HHHHHA HHHHHHHHHHHHHHHHHA HA HHA HHHHHA HA HHHHHA HA HHHHHA HA HHHHHA HHHHHHHHHHHHHHHHHHHHHHHHHHA HHHHHA CHHHHHHHHHHHHHH CHH CHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH CHHHHHHAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAANN AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAN AAAAAAAAAAAAAAAAAAAAAAAAANN AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAN AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAANNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN AAANNNNNNNNNNNNNNNNNNNN ANNNNNNNNNNNNNNNNNNN ANNNNNNNNNNNNNNNNNNNNNNNNNNNNNN ANNNNNNNNNNNNNNN ANNNNNNNNNNNNNNNNNNNNNNNNNNNNNN AN AN ANN ANN ANN AAANNNNNNNNNNNNN ANNNNNNNNNNNNN ANNNNNNNNNNNNNNNNNNNNNNNNNNNNNN ANNNNNNNNNNNNNNNNNNNN AN ANN ANNN HHA H HA H HA H HA H A H A H HA H HA HHH HHHHAA HHHHA HA HA HA HAA HA HA HA HA HHHA HA HHHA HA HA H PHH PH PHH PH PHHH PH PHH PHHHH PPH PH PHHHH PPP ALP ALP ALP ALP PPPPPPPPP AAAAAAAAAA
CC SSSSSSSSSSSSSSS UUUUUUUUUUUU SSSSSSSSSSSSSSSSSSSSSSSSSSSS
DDDDDDDDDDDDDDDDDDIIIIIIINNNNNNNNNNNNNN
LLLLLLLLLLLLL
NG NGGGGGGGGGGGGGG N
LLLLLLLLLLLLD DD LLD D LD DD LD DI DDIIIIIINNNNNNNNNNNGGGGGGGGGGGGGGGGGG
SS
TTTTTTTTTTTTTTTTT
CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC PTURES RETURNS PTURES RETURNS TTT RR SSS R TUU
Y SYSS SYS YS SYYYYSST MM TT
BBUUU BBB
YSTEM BU
SS YS YSS
M T
BUUU B
YSTEM BU
S
M
U
DD
GG NG NGGGG N DING
DD
GGGG
DING
UUUUU
D
GGGGGGGGG
E TES T SSSS T
INN TTTTT NNN TT GGGGG IS T SS T S THHHE EEE HHEEEEE
TESTING IS THE
E TESSS INNGG S T SS THHEEEE
TESTING IS THE
TTTTTT
PP
SSSSS
PPPPPT
YYYY
PPTTT
SSSSSS
TTTU
TTT
UUUR UR
EEEEEEEEEEEEEEEE
UR URRR
MMMMMM
RRRR
MMMMMMMMMMMMM
RE E
MMMMM
RRRE RE RE RE ES
BBBBBBBBBB
S ES ESS
UUUUUUUUUU
SSS
IIIII
RR
LLLLLLLLLLLL
RR
DDDDDDDDDDDDD
E
III
ET
NN
TT
NG NG NG NG
TUU
GGGGG
UU
GGGGGG
SSSSSY SY SY SY SY SYYYYYYYYYYYYY SYY SY SY SYYY SY SY SY SY SY SSSY SSSY SSSY SSSY SSSSSSSSSSSSSSSSSSSSS SSSSSSSSSSSSS YSS YSS YS YS YYS YS YS YSS YS YS YS YS YSS YSS YS YS YS YSS YS YS YS YS YSS YS YS YS YYYYYYYYYY SY SYYYYYYYYYYYYYYYYYYYYYY SY SYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYSSSSSSSSSSTTTTTTTTTTT ST SSSSSSSSTTTTTTTTTTT ST SSSSSSSSS YS YS YS YSSSSSSSSS YSSS YSSSSSSSSSS YS YS YS YSSSSSSSSS YSSS YSS YS YSSSSS YS YS YS YSSSSS YSS YSS YS YSSSSSSSS YS YS YSSSSS YSSS YSSSSSSSSS YS YS YSSSSS YSSS YSS YS YSSSS YS YS YSS YSS YSS YS YSTE TTTE TTE TE TTTE E TT SSTTTTTTTTTTTTTTTTT SSTTTTTTTTTTTTTTTTT ST ST SSTTT ST STEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEMM EEEEM EEM EM EM EEEEEEEEEM EM EM EEEEEEE SSSS
MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM BBBBBBBB M B MMMM BBBBB M B BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBU BUU BU BUUU BUU BBBUUU BU BBBBUUU BUU BUUU BUUUUU
YYYYYYYYYYYYYYYYYYYYSSSSS
BBBBB
SSSSS
MMMMMMMMMMMMMMMMMMMMMMMMMMMMMM BBBBBB
SSSSSSSSSY SSSSSSSSSSSSSY SSY SY SSSY SSSY SSY SY SSSSY SSY SY SSY SYYYYYS YS YS YYYYYYYYYYYYYYY SSY SY SYYYYYS YS YS Y SY SY SY SYYY SYYY SYYYYYYYYYYYYYYYYY SY SY SYYYYYS YS YY SY SY SYYY SYY SYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYSSSSSSSSSSSSSSSSSSSSSS YS YSSSSSSSSSSSSSSSSS YS YSSSSSSSS YS YSSSSS YS YSS YS YS YSSSS YSSSSS YSSS YS YS YS YSSSSS YS YSSSSSS YS YSSS YSSTTTTTTTT YSSS YSSSSS YSSS YS YS YS YSSSSSSSSSS YSSS YSSTTTT YST YST YSSS YSSSS YS YS YS YS YSS YS YSSSSS YS YSSS YSSTTTTTTTT YST YSTTTT ST ST ST SSTTTTTTTTTTTTTTTTTTTTTTT SSTTTTTTTTTTTTTTTTTTTT ST ST SSTTTTT ST STEEEEEEEEEEEEEEEEEEEEE TE EEEE TE E TE EEEM EEEEE TE EEEEEEE TE EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM EMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM EMMMMMM EMMMMMMMMMMMMMMMMMM EMM BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBU BBU BBBBBBU BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBU BBBBBBBBBBBU BBBBU BBBBBU BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBUUUUUIIIII UUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUIIL IL IL ILLLL IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIILLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDIIIIIIIII DI DDDDDDDDDIIIIIIIII DI DDDDDDDDDDDD
UUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUU
IIIIN IIN IN IIIIIINN IIIIN IIIIIIIIIIIIIIIIIN IIIN IIN IN INNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN
LLLLLLLLD LLLLD LD LD LLD LD LD LLLD LLLLLD LLD LLLLLLD LD LLLLLLLLLLLD LD D LD LLLLD LD NG NNNG GGGGG NG NG NNNG GG NG GGGGGGGGG
DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD
GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG NNNN
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TESTING IS THE
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TESTING IS THE SS
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How the world advances
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